fundamentals and production, page-5

Dynofish,

I’m not saying that SAE is in any way worthless, but just that I see inconsistencies between the marketing and the results on the board.

I’ve been involved in the sharemarket for many years, but only a HC member fairly recently. Am usually a big reader rather than a big poster. Posted a few times on the SAE thread about 2 mths ago and raised similar issues. At that time it wasn’t easy to see how the production tail would move. Clearer now I think, but debating alternative views is the great thing about these HC forums.

Have owned SAE in the past but not at the moment. I do feel the company presentations can be misleading … perhaps leading to HC posters being a tad too optimistic on valuations and facts, eg that production costs are only $10/barrel, that co. will generate $14m profit this year.

As far as I’m aware the company hasn’t given any detailed insight as to why production is less than 50% of that targeted at the AGM, why the prod’n tail on the first wells has dropped so rapidly (was it anticipated?), when will steam will used, how will that increase unit costs etc. All pretty important.

I may have been a bit unfair on JB’s remuneration. The Oil and Gas Weekly (4/11/2007) states execs remuneration of which John’s is indeed third on the list behind two Beach executives. However on rechecking, it lists them by their 05/06 remuneration. Figures are 05/06 $1,097,600, 06/07 $362,265. Presumably the first figure includes options and may not be considered to extreme.

Your other points are also fair. They are shallow wells and are probably long life at “moderate” rates (but moderate might be stabilising at 50 bpd per horizontal well). In fact despite the fall in oil, I think they might make a profit in the 08/09 year and future years, rather than the 07/08 year.

At McCool they are opting to try for a bulk pumping option and reinserting the water, rather than other techniques to try and isolate the main water-bearing section of the well. Wells generally become uneconomic when the water cut gets too high, and too much energy is expending pumping too much water around for very little oil. Without detailed information it is impossible to say how promising McCool might be. I believe all attempts to extract oil from Paris Valley (from previous owners) have delivered something like 360 barrels in total from the 100m OIP. The stuff is mighty heavy and hard to move. Can’t remember if any of these were horizontal wells. With these issues and those earlier I think it is very hard to put a firm value on this company.

Have been wrong more than once in the last while and will no doubt be again.

SAE is still on my watchlist and I hope holders do well. Dropped to 30-31c a few times and does look like good technical support around that level. And it’s probably true to say that if things go as they plan, they’re likely to be undervalued.

PE