200 feet of free oil!!, page-57

I have to agree with Rock there.

The volume calculations leading to big numbers like > 2M bbo are too simplistic. I'm not a geo but I do know that we are not drilling into spherical caves of empty space filled only with oil. The space in that spherical volume will not be 100% oil or even mostly oil, it will be mostly rock - the porous source rock holding the oil in place. And of the oil that occupies the pores of that rock, only 10-20% will actually be recovered.

Think about the numbers that Terry himself has promoted in his presentations - potentially up to 250 conventional/vertical well locations at Hawk Springs, with a total potential of up to 50 mmboe. Divide 50 million by 250 and you get 200,000, the typical EUR figure he has stated for each of these wells. Remember at a cost of $4M per well, 200,000 bbo will provide a decent ROI, probably about $5M per well NPV (assuming 200,000 bbls of oil produced, at a gross revenue of $/bbl after royalties, taxes and production costs), which Terry says will yield a total NPV for the 250 wells in excess of $1B.

Despite Terry and management getting bagged recently for the LTIP proposal, and problematic drilling operations, we all know he is a very smart geo - probably 2nd to none. So if he is saying the EUR per well is 200,000 bbo, you can be pretty sure he is not wrong to the downside of a factor of 10.

If we are lucky we will see the final results show a couple of payzones, one permian and one pennsylvanian, maybe each offering 200,000 bbo, but if thats the case it probably doesnt mean all 250 (if there are eventually 250) vertical wells will have the same.

Let's keep it real, and not over-hype our expectations, just because we've been starved of good news for 6 months. It can only lead to disappointment as Rock says.

Cheers, Sharks.