crucial fact, page-91

Hi Ptolemic, well argued post.

To your first point about questioning reserves (or company statements in general for that matter) I totally agree with you that it is right to question the reserves, even ordinarily, and it is useful from a capital preservation point of view to have a healthy degree of scepticism. In MAD's case with the reserves so high compared to production it is natural to be more sceptical. Such scepticism will only ease when the R/P ratio decreases as you say, which could be due to either production increasing or a reserves review leading to a downgrade, and I guess one camp or the other will then say I told you so - hopefully in the spirit that they will be able to shout some beers for the other camp if they have profited along the way.

What I will happily debate until the cows come home are unconditional statements made without any supporting basis of fact, data, logic or reasoning. I readily accept conditional arguments if the conditions are stated or reasoned or substantiated arguments if the basis for those arguments are given. Sadly, that is infrequently the case.

As I said, in relation to the R/P ratio, yes this is out of kilter because the reserves are unsually high. Only time will tell.

You mention production history, I have found one post from you containing production history dating back to 1947 I think. I have the individual well reports, which I posted details of a couple of weeks back. Unfortunately I didnt find well production histories (only 24 hr IP rates and status) - perhaps you could point the direction there since you offered?

Re the high number of dry wells tht you referred to, I have summarised the stats from the quarterlies dating back to when the company starting publishing active/plugged status for wells (2012 Q1) and count the following:

2012 Q1: 13 wells drilled, 9 active, 2 plugged
2012 Q2: 5 wells drilled, 2 active, 3 plugged
2012 Q3: 17 wells drilled, 13 active, 4 plugged
2012 Q4: 24 wells drilled, 10 active, 14 plugged
2013 Q1: 23 wells drilled, 18 active, 5 plugged

All in all by my count, 82 wells drilled in those 5 quarters for 54 active wells and 28 plugged wells. The success rate of active wells is 54/82 = 65%.

The cost of active wells would be 82 x $250K = $20.50M. The cost of plugged wells would be 28 x $70K = $1.96M. The total cost of drilling these shallow wells = $22.46M.

During that period, production declined from an average of 755 bopd during 2012 Q1 to the low of 493 bopd in October, and then up to 1196 bopd last month. This overall production curve obviously showing the cumulative effects of earlier well decline and shut-ins, and low number of new wells drilled during 2012 H1, before the new well counts and presumably well workovers increased in 2012 H2 and 2013 Q1.

By your own admission, some of those plugged wells were outside the area to where proved reserves were assigned, or probably outside the productive fairway particularly in 2012 Q4 where the highest number of plugged wells occurred and by the company's advice they were testing the fairway boundaries to delineate the extent of that productive fairway, as well as testing Het limestone targets that were unsuccessful (6 of the 28 that were plugged).

You mentioned in an earlier email about the company's capex spend and the resulting production increase as a result. I dont know what they spent on workovers, but its not difficult to calculate what they spent on drilling the 82 wells in the last 5 quarters, and for that they have increased production from 755 bopd to 1196 bopd - adjust for WI because some of those wells will be GS wells, at a guess I'd say the increase attributable to MAD WI is around 80% of the 440 bopd increase, or around 350 bopd. I've seen better for a $20M spend, but thats not too shabby for a company that is still imo in the process of fairway delineation and early field development.

Cheers, Sharks.