acquisiton and consolidatin

Following is a Neo's reply to my inquiries.

Sent: Wednesday, 21 June 2006 1:39 PM
To: Kevin Kartun
Subject: Share consolidation and Acquisiton

How in Gods name did you stuff this up? Nuenco was such a good story and either through incompetence or malfeasance you have left loyal long term share holders out to dry. Is there any possible way that you can explain why it would take so long to complete testing and why would you think that a share consolidation would be a good thing at this point in time? Please feel free to forward your response at your next convenience however, I would appreciate you do not send the standard reply which is doing the rounds.


Regards,

John


From: Kevin Kartun [mailto:[email protected]]


Dear John,

Thank you for your observations. Nuenco as a result of the deal with Surf is now an even better story. The acreage acquired is much sought after and was acquired in spite of stiff competition from competitors and will be very strategic and valuable even if no holes are drilled into it. Please look at the updates to sheholders on the testing of the wells and the FAQ's on the updated website.

Kind regards,

Kevin.


Dear Kevin,

Thank you for your response however, you did not answer my questions regarding time taken for testing or how a consolidation would benefit the company. The consolidation is a method usually used by companies to disguise poor performance and the market today has reflected that. Please do your utmost to have the directors reconsider this option since it appears it will only give the share price further room to fall.


Regards,

John


Dear John,

NEO has tried hard recently to keep investors up-to-date on testing the wells (this was imperfectly done in the past). Essentially it has taken longer than expected to test the wells. Not to make excuses but there are multiple gas and oil zones in unconventional plays with fracing required, availability of rigs and personnell has been a problem for NEO and the industry in general, there has been a change in Operator to Orchard Petroleum which has been positive and the company is cautious to report only steady state results. Mud was used to stabilise the wells but now that same mud must be removed or its influence lessened by the introduction of acid to get representative flow-rates.
The old adage don't overpromise and underdeliver is at the front of the minds of management as well as not looking to mislead the market.

As to consolidation I am not sure what the main consideration was but the number of shares is getting very unwieldy and the share price is in the couple of cents per share domain, which is penny readful territory. As I find out more I will let you know.

Regards,
Kevin.