Good to finally get an update and I must say for me that it has...

Good to finally get an update and I must say for me that it has increased my confidence around the Capitola project.

In terms of highlights, Mahaffey Bishop is currently producing at a steady rate of 90 BOPD which is very encouraging. This was a straightforward well but good to know we can now do straightforward wells with no issues. Similarly, it looks like McCain has also been successfully drilled and hopefully production at this well will continue to increase over the next few months to the same level as Mahaffey. The natural gas sales from this well are a nice bonus to cash flow (around $438k per annum at current gas prices and production levels, ignoring the premium the company is receiving and likely increases in production).

Hope Boles is a bit disappointing, but it sounds like the production rate can be improved by drilling out the plug. I’d like to see the company fix this problem, which will again go to firming up confidence in the operational team.

Our margin at current oil prices is around $40 (ignoring admin and leasing costs). If we can double our current production of both oil and gas (conservative in my view, with improvements from the two existing wells plus two new wells), our net margin from the five wells will be around $3.8M per annum (again, ignoring admin and leasing costs). I don’t need to tell you what would happen to this result if there is a sharp rebound in the oil price…

Also, the company will for the first time in coming months give us some numbers around its reserves at Capitola. This will be good for broader investor confidence.