Now that we know for sure that Eni is drilling Blackwood 2 I had...

Now that we know for sure that Eni is drilling Blackwood 2 I had another look at the NT/P68 Farmin flowchart to see where the agreement goes from here. This is necessary when looking at fundamentals from a LT investors point of view.

* The flowchart can be found here (pls scroll down)*

When I studied the chart I found that it did not match the release statements regarding the 50% interest earned by Eni.

To illustrate the point I have reproduced the bottom half of the chart here:

Eni have 18 months after to drill B2 post decision date 4 Feb 2013. This will take us to a maximum date of 4 Aug 2014.

After this they will have 180 days until they make the next decision whether or not to continue to FID.

There is a sub-note to say that '* denotes 180 days from later of Heron 4 or Blackwood 2 well completion.' which means that the timing of the H4 well, should Eni decide to go down that path, could alter the timing of that decision.

At the the 180 day decision point there is a line reverting to the box which says ’ Eni withdraws from Blackwood Area (returns equity to MEO)’ and MEO retains 100% Blackwood area.

This decision point is ambiguous as it does not tally with the subsequent releases which infer that, by committing to B2, Eni have fulfilled the obligations for 50% equity in the Blackwood area of the permit.

I decided to contact MEO to clarify this anomaly and have decided to share their explanation with the forum, in case anybody else was as confused as me.

‘Eni already have 50% on title and it will be earned once B2 is drilled.’

‘The 180 days refers to the decision to increase their interest to 75% or stay at 50%. If they stay at 50%, then development studies must commence.’

‘The intent of the clause is to keep moving towards development.’

So, once B2 is drilled, Eni will have 50% Blackwood.

Since contacting MEO another question has occurred to me. Eni will have a 50% share in Blackwood but what if Eni decide not to go ahead with H4. If they decide to walk on Heron 100% Heron will revert to MEO. What happens then? I am sure MEO would feel that Heron still has potential but Heron and Blackwood are in the same permit. Would the permit then be divided at renewal – but there is the 50% relinquishment?

I have a feeling that Eni will commit to H4 which will probably be at Heron North. This would bring the permit back to balance. I will not bother MEO again with this question until we know Eni’s decision re H4 when the release may clarify this point.

Regarding Blackwood, MEO have estimated a GWC point but looking at the maps and how Blackwood has now joined Blackwood East the GWC may be lower to form one reservoir. The other scenario B East may be a subsidiary structure. Perhaps MEO and Eni have different ideas about the structure(s). I hope Eni drill B4 on the main structure at Blackwood and leave the exploratory drills to test the extent of the reservoir(s) until later. We need a positive result this time!

I am sure we will look at Blackwood more closely nearer the drill. Eni have to drill ES by the end of the year. I still haven’t heard of a rig being booked. I thought it would be Ensco 109 but their schedule has changed. I am sure that when Eni find a rig they will use it for B2 in the same programme. Hopefully H4 will be included too. This would be before the end of 2013 – hopefully before the cyclone season (pre Nov).

By the way, I have been a voyeur for the last few weeks as I didn’t want to comment until we had the 2Q report and a decision about Blackwood, so I haven’t been ignoring you agentdownload:). The bank balance is still in the black and will be for some time. We have a farmout pending (WA-454-P) and the opening of the Seruway data room will not be too far away. Now we also have another definite well to look forward to.

Thanks for the info about Gove it could be an interesting development but I don’t think companies would like to discount their LNG to help out the RIO smelter. There are a few stand-offs in that part of the world at the moment.

Good luck to those who have left the MEO raft. Good luck in your future investments.

For those MEOmites remaining and new people on board, let’s hope 2013 brings better fortune than previous years.

But it is a matter of time and patience. This kind of strategy is not for everyone. As it has been said, there are probably better trading stocks out there but I still think MEO will have a result in the long term–it is just a long time coming!

Is my confidence misplaced? One day this question will be resolved, I am sure.

#:>))