Re: End of carnageIMO, I reckon the end of carnage will be in...

Re: End of carnage

IMO, I reckon the end of carnage will be in January.

Market will begin to pick up by then and the sector will be rife with mergers and acquisitions.

NDO will post its Dec quarterly giving the market its first glimpse of the cash flow coming from Galoc. The key unknown will be the number of days on production. I'm confident that the well capacity is there but not confident that the operator can keep them flowing. The other key of course will be any signs of unforseen water cut; I wouldn't expect that sort of information to become public until the following quarterly.

The shoe will have dropped with regard to the farm-in and we will know who NDO are in bed with and whether they chose a quality partner or got stuck with another mob like Vitol/GPC. Market conditions will favor the farminee and my expectation would be for NDO to give half its interest away for the price of 1-2 deep water wells. It will take another quarter for the new venture to sort itself out and commit to some drilling activity which I would expect to be pushed out into 2010.

Take over activity is likely as there are many cashed up companies who will be looking for undervalued assets. Will NDO be predator or prey?

When cash returns to the sector I expect that it will head towards low risk, proven companies with demonstratable cash flow. NDO will be in a grey area until their second quarter report due in July.

I reckon a good sleep is in order is in order until then.

Regards,

opt