if surprise was gushing along at 1000 bopd per day i would most likely agree with you. but it is not. it is running somewhere i would guess at say 200 bopd, maybe 250 at the moment but let us say 200 at least over a longer term. there is no evidence that the well is defective, in fact at the time it was trumpeted as a hugely succesful result, first horizontal well, drilling genius etc etc. the outcome tends to indicate a fairly tight reservoir at least over a wider drainage area of the reservoir than the well core indicated. even if the ooip volumes are present as estimated it is going to take some time to recover. there is no guarantee that a second well in the field will be any different. it may well be, but then again it may not. let us consider a long term average of 200 bopd, which is 73,000 bbls in a year. at $100 per bbl that comes to $7.3 million. let is further imagine perhaps optimistically that this delivers 25% clear profit, which is then $1.825 million. now recall that a reasonable well cost estimate could be $12 million especially if a long horizontal is drilled and more if any extensive fracking is done. that suggests something like 6.6 years to recover the initial drilling costs. if ctp were well endowed with the readies, then the chance of finding the upside might be worthwhile. but as it is clear to all concerned the discretionary reserve account is constrained or at least it appears to be.
under these circumstances i for one am inordinately pleased that there is an emphasis on value for money. the drill baby drill and hang the costs crowd seem to have little or no regard for economic reality and the risk factors involved. they would do well to recognise that 6.6 years is a long time between dinners if the lower end of the possibilities is realised.
trust this helpful.
CTP Price at posting:
33.2¢ Sentiment: None Disclosure: Held
