Hi Notty. It's a good point U bring up re expectational value and a "hard release of the brakes". But why would such a thing happen ?
I've commented before that the market tends to have assigned market cap values for most companies which tend to be loosely based on their reports. Then one can, it appears from recent market moves, cut that value in half, due to price capping for clients to see higher value later to sell into even without the LTH belief factor.
Now each recent report to date has tended to CURRENTLY value 88e on an acreage peer value, and pretty conservative values too, given the JV has now puts its foot on a massive increase in acreage via the last lease sales.
PB made comment as to why in the last UK preso if anyone wishes to know the reasoning behind this potential further aquisition. Potential because they have only paid the deposit and the completion of which, may depend strongly on the upcoming flow test.
Consequently no market value has been assigned yet to this acreage, I guess the logic being if the HRZ doesn't flow to expectation then any oip can't be accessed so what would be the point. Fair enuf I guess.
But IF it does flow to expectation and PBs HRZ model is further derisked, then it's hard not to begin to assign further value to not only the current D&M number but, to the internal resource number, AS WELL AS the newer acreage, which would almost certainly have the balance put down on it.
If the case, we can begin to see just why the flow rate result may have a multi revaluation effect on the market cap.
Now I know pretty much none of us agree with how the market is currently valuing 88e and that the broker valuations are way off the mark, but then they don't have the belief/faith that most LTHers r assigning to PBs unconventional toolbox model. This being interesting from the standpoint that the main reason behind someone taking a position in this company is the very presence of PB/Bex in this play !!!
I'm pretty sure there is the belief that the resource, at least on a D&M statistical basis, is present, after Ice 1 results. However the associated assigned per bbl value is low due to the low oil price as well as the current unknown ability to extract the resource.
If the HRZ does flow decently, then not only does the resource become extractable but the model is also derisked to the point of the HRZ becoming yet another recognised workable unconventional source rock.
But does the magnitude of the flow rate also become important from the aspect of the economics of the play. It seems obvious to state, the better the flow rate the better the value, but this may well be a crucial point in any bigger eyes that r on this play as a T/O target. If the number is conventional-like high then the target takes on more clarity for such an event. If to the low side then it may take further sweetening, either by better completion techniques or proving up some of the potentially easier to extract conventional on the acreage, IF those leads prove up of course. IF both were to occur then the creaming of the curve begins to take on more reality as well as the T/O potential.
This is one of the reasons I like this company as there is more than one dimension to be able to multiply value in the company.
So imo the magnitude of the flow rate number is important if we want to see a hard release of the brakes and some wheel spinning prior to take off.
Perhaps, as some have observed of late, it's some market wheel spin we r seeing atm !!! A market "staging", in drag race parlance, if U like. Gotta get those Mickey Thomsons stickey before release
I keep coming back to the company annmnt comments post the Ice 1 results and the potential for conventional-like flow. Don't know about u guys but it gives me a funny tingly feeling when ever I think of these commments.
As we have found DW is exceptionally good at the hint. But as we have seen with Ice 1, they r also exceptionally good at under promise and over deliver. If we were to apply this to what they r hoping for with flow(or is it what they expect ?)
then the hard release becomes that much closer to reality.
But release to what ?
Well again, that becomes dependant on the flow rate magnitude.
And what of the so wheel spin we see of late?
Well the better one "stages" in a drag race the better the launch. The better the launch, the faster one goes down the strip.
Is that what we'll see on good flow results ?
Well if the usual chart technical dynamics hold true, as does my drag race analogy, then U may well get Ur " hard release" Notty
(20min delay)