draft letter for david prentice, page-6

Thanks Nazzy. Far more appropriate you "ask the questions". I have mentioned before my dismay for not having received responses or acknowledgement of my queries - hence why HC became an avenue for my questions and concerns etc.

I accept that the aquisition changed the game plan somewhat and in that context I rabbit on following. There are numerous "issues" I would like addressed but frankly they would mean little so I will keep it to what I believe has disappointed the market most - most certainly me. I was expecting significantly greater revenue/production that the last 1/4ly. I also expected a far better tilt at drilling and testing than what has ocurred - which can only be described as a virtual non event - particularly when expected in context of company announcements.

Whilst my calculations are indicative only (and please review and critisise) they do IMO highlight issues which should be addressed by the MD (as after all - he made the statements and I/we took them in good faith). I will openly state however that I believe that DP is best positioned to lead RFE forward however, in light of the fine post from ShareChaos, where he stated that RFE "bit off a fair bit to chew", I strongly question DP ability to do justice to his position in this company whilst also CEO of another ASX listed entity as well as being a Director of another. I personally would prefer his focus on the Fork - he is remunerated appropriately for his full attention.

Amongst other definitive production and revenue announcements as described by Kruiser I specifally refer to the following. Click on the Blue links to view the relevant documents.

On the 29/10/09 RFE announced that Strategic Acquisition Positions Red Fork to Dominate East Oklahoma Gas Discovery.

In that announcement RFE stated that -

"EOK South is currently producing at the rate of approximately 1,000,000 cubic feet of gas per day lifting the Companys current total daily production rate to approximately 3,000,000 cubic feet of gas equivalent, generating annual gross revenue of approximately US$5 million per annum at the current spot price." (nb spot price on the 29/10/2009 was gas ~ USD$4.50 and oil ~ USD$75.00.)


As far as I can determine RFE is subject to mandatory reporting of gas volumes. These rules are found at - 165:10-1-47. Gas volume reports to Conservation Division - page 36. Oil production is subject to different requirements - I think - and recorded by way of the Gross Production Tax Report made to the Oklahoma Tax Commission - still sus'ing that out.

As such the 1st month of production, under the RFE banner, of the Coronado Great Plains Llc well aquisitions was Novemeber 2009.

November production as reported by RFE was 33,807 Mcf declared production volume - (see - Measured Volume Report November 2009.)

December production as reported by RFE was 34,060 Mcf declared production volume - (see - Measured Volume Report December 2009.)

For the 1/4 just reported the purchased production wells contributed 67,867 Mcf, which at an assumed spot price of say USD$4 MMBTU (Henry Hub) and USD - AUD exchange of .90 generated gross income of AUD$300,000 for the 1/4. This represents ~60% of reported revenue in the Quarterly Activities and Cashflow Report.

If we then assume that the balance of revenue in the above cashflow report was oil revenue from Tulsa wells Rosier 1-27 and Fuss 1-34 (refer AGM presentation - slide 18.) then these wells are producing at only 20Bbls per day each. This is less that the combined 100Bbls declared in the aforementioned presentation and considerably less than the 85Bbls per well per day announced on the 06/07/2009.

It is reasonable to expect that production volume WILL BE at the very least in the vicinity of those stated by the company. Currently production from the Corodano Great Plains wells appear to be as suggested however company revenue has not grown accordingly. Excluding the purchased wells RFE revenue declined by 60% 1/4 on 1/4 or thereabouts.

As a consequence of this and the fact RFE drilled wells are not producing 09/10 year revenue will not achieve 50% of that announced on the 29/10/09. For the 1st 1/2 of the year RFE gross income was around USD$1 million. It is plainly obvious why the SP is languishing where it is. I was in fact at one stage confident that full year results would surprise to the upside - you only need to review some of my valuations in mid last year in that regard.

It is fair to ask amongst other things
1. Exclude the revenue from the Corodano aquisition - why has RFE shown a significant decline in revenue and accordingly production in the 1/4.
2. Why are the 2 production wells at Pawnee not producing at 85Bbls/day as announced.
3. Why are further Pawnee wells not yet producing oil to market.
4. Does RFE have the capacity achieve its operational strategy as articulated in the AGM presentation for the balance of this financial year and in general. Particularly noting its dismal operational performance to date relative to its own stated goals.
5. Given the magnitude of Redforks strategic development challenges as have already been demonstrated is it appropriate or in the best interests of RFE that the MD hold other CEO and Director roles.

Anyway - enough from me - DYOR on the above and ask if you wish. I am in for the long haul as I said up front after I had finished buying in.

All good-ish.

Go the Fork. (and the Blues)