Ann: Permian Basin JV Extends Strikes US Strategy, page-2

re: Ann: Permian Basin JV Extends Strikes US ... Good to see the guys are getting active with STX after a dud 2011.

There's more sp activity and I'm feeling more positive than I have for a long time.

However, I do wonder how they are going to afford to pay for all this. With all the announcements of drilling, leasing and JV's they seem to have committed far more than they have cash in bank and that they can earn in cashflow. How does everyone else see it?

Are we going to see another CR or debt bought in to fund these activities?

On another note, can someone help me out with this statement at the end of their announcement:

"Under the terms of the Permian Basin Joint Venture agreements, Torch has the right to ‘back-in’ to 25% of Strike’s Joint Venture interest (that is, Strike’s interests will reduce to 18.75%), but only after Strike has recovered from production all capital expended on the MB Clearfork Project acquisition, exploration and development."

Does this mean that after they have drilled, and assuming they are succesful, Torch can simply give STX back the cost of the drilling and take 6.25% equity?

To me this reads that STX takes the risk on the cost of an unsuccesful drill and Torch takes back the upside if they are succesful. Who would do a deal like that and why?