calm down people

Nexus Energy has announced the first drilling results of the Crux 2 well, with indications that the top gas zone discovered in the Crux-1 well (Zone A) is not present. This does not indicate that the Crux-2 well is a “duster” – there is still another 300 metres of potentially gas-bearing sands to be drilled through before the well is complete.



The Crux-1 well, which is two kilometres to the south, discovered 140 metres of condensate-rich, gas-bearing sands. The Crux-2 well was placed at the northern extremity of the Crux field to test if the full 140 metres of gas sand continued beyond the northern boundary of the permit.



Even if Crux-2 does not intersect any gas-bearing sands (and there is still 300 metres to be drilled through), the field will still contain between 50 and 70 million barrels of condensate and will still be a commercial condensate stripping development capable of producing $300 million a year in operating cash flow.



Therefore we believe that the market has completely over-reacted to today’s drilling report. The report also ignores the fact that there is still and unexplored southern zone on the Crux field which the 3D seismic suggests could contain another 40-50 million barrels of condensate.



A full assessment of the Crux field size can only be made after all of the potential production zones have been tested. This will take at least another 2-3 weeks.



Today’s result does not change my view on Nexus and today’s sell off represents an opportunity to BUY this stock at extremely cheap prices.