get forked energy, page-5

Hi Shrewd Crude

I'll just disclose that I am a reasonably welded on holder now of the Fork - jfyi when assessing my response but hopefully you'll find this thread more civilised than some of the other ramps you mentioned.

thanks for your post - IMO you give a generalised macro view of the environment that Redfork is operating and a generalised macro view of the modus operandi of the small cap end of the sector. I not sure I can dispute anything you have said in that regard as it was framed in a very generalised way but I am clearly unsure that the situation is as dire looking forward as you have articulated.

Consistent with your macro overview - the low cost of gas presently - driven by significant oversupply (and here I am specifically talking about onshore US) will and is leading to energy substitution whereby the big ticket users of energy (i.e. power generators) will substitute energy sources consistent with cost benefit. Researching this already demonstrates coal fired plants are already converting to gas and a significant gas fired power plants are planned to be constructed. These new operations will suck up a fair quantity of supply.

The low price of gas also elimates high cost uneconomical operators which decreases supply. Known high operating cost fields are also not having more holes plugged in them as presently the economics do not support the same.

The other big factor is the US economy in general. It has been in recession and/or flat at best. I subscribe to the view that the US is not a failed economy and will grow again.

IMO the price of gas is cyclical and presently there is absolutely no doubt that it is significantly oversupplied - onshore US. However IMO - and as we are discussing this on a macro level the economic laws of supply vs demand will reach equilibrium, influenced by some of the factors outlined above, and probably swing to the other extreme at some point in the future.

Your post highlights the potential (and IMO real likelihood) that price will remain depressed until at least November ( or as is more likely the beginning of Northern Hemi winter).

I believe RFE gas play at EOK is a compelling development due to its low cost of production and the fact that it is not intended to deliver to market until the US winter - probably enough time for the economic supply/demand gyrations to resolve somewhat. Given a 20 year well life at 8% production decline I would expect each of these wells to deliver reliable earnings to Redfork.

Further - the Tulsa oil play - is just a cash bonus.

Personally I am more comfortable in backing a company with few share on issue, no debt, with a solid core of shareholders and that is likely to be cashflow positive in the near term. For example - when will something like CUE which has circa 692,000,000 issued shares, $44 million in liabilities and made a loss of ~$21 million (-3.3c/share) going to give a return to holders? I guess it is how you look at it.

Cheers

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