a billion dollars gone, page-9

marksman old chap,
it is not very hard to see why the billion has vanished. It is very easy really, the oil vanished. In fact as the drill bit proved, it didn't just vanish, it never was there in the first place. So how did it come to this. Through a continuing series of rashly over optimistic conference and ASX releases, thats how, which were swallowed by the punters at face value. Examples?
5 sep 06: Perth Good Oil Conference, estimate of OIIP goes from 13mmbo to in excess of 90mmbo. Also released to ASX.
8 mar 07: ASX: SW estimates confirmed in range OIIP 38 to 97mmbo, most likely 65mmbo.
29 jun 07: UBS Energy and Utilities Conference: NE1 reserves summary, P90/50/10 being 22/40/67mmbo. SW OIIP P90/50/10 being 38/65/97mmbo.
29 jun 07: ASX: "likely to have up to recoverable 100mmbo"
2 jul 07: ASX: Gaffney Cline: best estimate of potentially recoverable volume is 40.3mmbo for SW.
All carefully worded to be sure, and boy oh boy it helps to be familiar with the language.
As has been noted elsewhere, the P values are derived by a Monte Carlo simulation based on a range of values assigned to the subsurface model of the "field". And as became common language in the early days of computer output, GIGO.
The astonishing thing is that so much confidence could be assigned to these parameters when there was so little hard data to back them up. It is not terribly sensible to simply take the latest imaginings of a seismic interpreter and build such a house of cards. Look at the OIIP P90 figure for SW, namely 38mmbo. P90 means that there is a 90% chance of having or exceeding 38mmbo. As it happens, there appears to be effectively none. The conclusion to be drawn is one of exceptional bad luck, namely the 10% chance came up. Or alternatively the analysis was run on ill-founded inputs.
And if the same rigour has been applied to the derivation of the P50 reserve figure of 40mmbo for the producing NE area, then maybe the early water cut becomes more understandable.
What chance one might ask does the average investor have in this environment.
You mention that a certain gentleman's reputation is on the line. I think actually it went on the line on 5 Sep last year.