4c is the floor, page-414

Oil producers are struggling to break even at current prices, companies will not continue to produce below breakeven therefore it is inevitable that the supply reduces. Once supply reduces the price returns to a point where the remaining producers are profitable. OPEC have the ability to suppress the price for a limited period although that is coming to an end. Once OPEC are happy with the squeeze they have put on the competition they will allow the price to recover, in all likelihood that will occur this year, perhaps they will allow that to begin as early as this weekend?

88E production rates are going to be the key to calculating break even forecasts and the ultimate profitability of the Icewine field. All indicators to date support a high flow case indicating that the breakeven will be sub $40. DW apparently stated in the resent UK presentation that the current POO is above the breakeven price for the play. Any further improvement in POO represents an increase in $/bb potential.

My opinion is that we will be looking at an oil price of ~$60/bbl by the time Icewine 2 goes into production therefore with an implied BE of $40 we will be looking at $20/bbl profit on any flow achieved.

IP30 flow rates also IMO will be substantially better than your typical shale play. The multi well pad design, high porosity and permeability, light volatile oil and significant early overpressure collectively point to a scenario that supports a well flow around 5000 bbls/d

5000bbl/d *$20 profit per bbl represents $100,000/day initially. Assuming a well completion cost of 30M and typical decline rates then these rates would see the well break even within 2 years.

Obviously there are a few ifs/buts/maybes in the assumptions above but the upside remains immense. You might be able to sit on the sidelines and target an entry during the lead up to the drill, however there are several things that could positively set the SP in motion prior to the drill.

-Oil price movement's
-Farm in being achieved
-Release of estimated BE price
-Great Bear results release
-Alaskan State incentive review/extension of rebates
-Investment decision on ASAP gas pipeline

When you look to the downside the only real issue seems to be that many holders are too impatient to realise the gains. This was a get rich quick stock for a few weeks but IMO has now transitioned to a get rich slowly one. Some patience (up to 9 months) may be required to get to the next catalyst but it seems pretty clear that it will come.