Sophisticated investors are going to have a field day today, as the well actually met the company's objective - which was to collect data. What we don't know is how 'good' the information is as it is too early to know. We only know that the well isn't commercial. Once the information is incorporated into the database it may provide for economic reason to drill elsewhere (Rua Bein @600Mmbbl-1700Mmbbl) as well as drill site calibration. That's a billion barrel target at the high end.
Having worked o/s for a long period, I have noticed that the Oz market is obsessed with short-term performance, which feeds misunderstandings, especially in the O&G space. The industry and its processes dont marry with short-term stock market performance. Not every well will be commercial. Its all about how the total will contribute to a commercial proposition. This is why you have to 'prove-up' a field. This is a discovery, but it wont be the well we produce from, nor will it be the well that significantly defines a resource - it may mean drilling elsewhere in order to determine this as I said earlier. We will need to see a plan from the JV in the coming months.
In saying all this, it has missed my initial expectations knowing that the location was chosen in order to target the highest CoS, rather than resource size. The shows wouldn't indicate a significant resource here. But, its the learnings that could prove more important. At the moment the market is pricing in nothing that has been learnt and/or gained.
This is just Vietnam, without the North American operations and assets. This is why I am comfortable as all these assets underpin the high risk plays. Feel free to shoot me down, Im ready.
NEN Price at posting:
29.5¢ Sentiment: Buy Disclosure: Held
