Yes Sharks37, it will be very interesting to see the Q3 production figures from the 16 wells (11 Blue Ridge, 3 Boling, 2 Nash Dome). It may not be outstanding, but MAD has always been good at understating and over delivering. Whatever these figures and market reaction, the MoU with Gulf is the absolute game changer. In the near-term:
- $9m upfront for a commitment of 36 wells (12 wells a month, utilising 4 of MADs rigs) on the fairways. - The MoU is dated 3 Oct with a 30-45 day period to be turned into a binding agreement . So at the latest, mid Nov, 2 weeks after the quarterly, it should be all systems go. You can bet Gulf and MAD will be targeting high production zones immediately. - So from mid Nov-end Dec that equates to 18 wells, plus whatever has been drilled by MAD in October, so all up 20-30 wells??? - That means the Oct-Dec quarterly (released end Jan 2013) should put MAD in a firm production uptrend. - Sometime Dec, 2 more MAD rigs come online able to drill to 10,000ft - After that its 36 wells a quarter from the fairways! (with the “flexibility to scale this up significantly in the future as infrastructure and target acreage builds”)
As the AFR stated, the MoU seems to have flown under the radar. However, once the MoU is a signed agreement, its another box ticked in this growth story.
As Muppet posted, any of these production wells can hit multiple pay zones, the production figures could exceed expectations. In the meantime you’ve got high impact wells, reserves increases, and further lease acquisitions a possibility. The deal with Gulf is also not exclusive.
BK your right, production has got to increase. We all agree its taking longer than we would like to lift production, the market wanting to know how MAD is going to get their reserves out of the ground. Now you know. I note you hold no stock but feel your duty is to advise MAD holders how overvalued the stock is. Obviously the market DOES value the oil in the ground, even if the production figures are currently way too low. So do the institutional and soph investors who forked out $50m @ $1.02 back in July, so does Gulf who’ve forked out $9m and committed to 36 wells. The market is always pricing in future growth prospects. As Sharks37 said “Since MAD is undervalued based on reserves but overvalued based on production, management are clearly now focusing on addressing the latter, and imo the SP will follow.”
OF course it could all go pear shaped, dusters, Gulf pulls out, whatever. But from what I’ve seen the last 2 years, management seems top-class and their reports and presentations are the clearest and most informative I’ve come across. They have been methodical and signalled to the majors their intent to become a producer. If production figures do start validating the reserves, it becomes an attractive target.
Lastly, everytime the share price “gets smashed” (yesterdays post), it just seems to be an opportunity to buy like todays rebound.
Good luck all holders.
FDM Price at posting:
$1.21 Sentiment: Hold Disclosure: Held
