risk vs reward, page-21

I thought I would post an extract of a report which I found during my research to better understand the risks of this game. It indictes O&G exploration is not so 'cut and dried'. One or two wells don't define the final outcome. It also demonstrates the value of 3D seismic data and advances in technology.

Source "Oil and Gas Resources of Australia - 2000" by Geoscience Australia. Page 37.

"Two variant big bore wells, PEN 01 and PEN 02, were drilled and completed into the Perseus
accumulation from the North Rankin platform as the first stage of additional development of the
Perseus accumulation in January 2001. Each well will produce over 8.5 million cubic metres of gas
per day (300 million scf/d). The wells were completed with 9 5/8 inch tubing in the upper section
and 7 5/8 inch tubing in the lower section.
The Perseus accumulation lies within the graben between the Goodwyn and North Rankin horsts.
The field was first penetrated in 1972 by the North Rankin 4 well but was considered uneconomic
because of the poor reservoir quality encountered in the well and the limited extent of the mapped
closure. Following the acquisition of 3-D seismic data over the field in 1983, and the subsequent
reprocessing of data in 1987, a small pinch out closure was mapped on a structural nose plunging to
the north-west of the North Rankin 4 well. The closure was tested in 1991 by the deviated appraisal
well, North Rankin A 22, drilled from the North Rankin A platform. The well encountered a gross gas
column of 144 m in excellent quality reservoir and has been producing since completion through the
North Rankin facilities.
During the early phase of production from this well it was observed that the pressure decline in the
reservoir was less rapid than expected with such a small closure. This indicated much greater
reservoir energy and therefore, potentially, a larger gas accumulation. The acquisition of regional 3-D
seismic data in 1992 served as a basis for a re-evaluation of the closure and identified the possibility
of a much larger trap. This evaluation led to the drilling of exploration well Perseus 1 in 1995. This
well confirmed the existence of a large trap. The reservoir pressures collected in this well, together
with the pressure monitoring in North Rankin A 22 well, indicated likely gas in place of between
227 000 and 340 000 billion cubic metres (8 and 12 Tcf)."

For the record I have sold out of KAR. The short term risk and volality has become too great for me personally. I accept lower returns as a consequence. Good luck to holders.