Good morning,Some early Swe traders might remember I started a...

Good morning,
Some early Swe traders might remember I started a thread some time ago to discuss potential pitfalls of Swe. I woke up one day and my investment had surpassed $50k having started modestly and I wanted people to play devils advocate. in the same vein...now my investment is larger...i recently spoke to a colleague about SWE in a bid to get his feedback. This chap has been trading a long time, is versed in both FA and TA and FWIW has a very high tolerance to risk. He is not a SWE holder. Here is what he communicated to me ,:

He believes the SWE market cap is now extremely high and whilst SWE could still run further, it's still very risky. Prospects always sound like a sure thing until they drill, and then in the majority of cases the well is either a duster or proves to be uneconomic.

NSE did a similar run a few years back. it had about $50m cash and JVs with all the majors, and the market cap ran to about $200m. then it hit a few ordinary sections and not much else, and now it is back to $40m with $40m cash.  His outlook is that oilers are really only good in the leadup and that once they start drilling, it's usually time to get out.He also said I shouldn't be surprised if, upon getting good news after any trading halt, the shareprice does an about face for a while. this is also typical oiler movement - run like crazy until news is out, then tank as everyone exits.

if you want to see some typical african oiler charts, check the 5 or 10 year charts for KEY, TPT or RIA. none of them keep their gains. there is basically a period of 1 or 2 years max where the oilers talk about their prospective resource as though they are already proven, and everybody pretends the same. Along the way, most news events get sold into heavily, and then the cycle starts again but his view was you basically want to be out of there before they reach target depth on the drill. if you've already doubled or tripled your money or better, there is no point hanging around for the drill. the above charts, and every other speculative oiler he can ever remember, all end up coming all the way back down again.

It was recommended I have a good look at RIA, an african play. in 2 years it went from 6c to 85c while everyone talked it up and they did their mandatory cap raises (oilers are very capital heavy. they'll need to blow $50m before they get anywhere) and then it went back down to 30c after they finished raising funds, and before the company even sunk a single drill.then while they were drilling it went back up to 40c ("buy early, sell before spud" trading,  or BESBS) and then back down to 20c before it was even flow tested. by then nobody cared anymore and now its 3c. If you look at RIA and TPT charts they are indeed sobering.

I just post this here today because we are heading into new territory and have many new investors, some of whom are young and probably don't want to lose their dough...any more than I do. I'm no pro myself but I saw and was involved for better and worse in the 87 asx crash, the internet bubble crash of the nineties, property crashes and the gfc. I just think whilst it is easy to be seduced by the oil fever everyone should remember that we aren't trading with monopoly money :-).

His final parting words :
We all probably have time to milk some more out of SWE, just remember to take profits along the way
.

All the best to all on board.
dt

p.s.: if we do actually strike the mother lode of black gold....forget everything I said and toot toot all aboard etc