hess vs bhp vs the rest, page-10

Hi Carbonblack and other interested parties.

I'll admit a few months ago I wanted to see the gas flow tested too but my thinking on this has done a complete 180.

Right now I'm curious as to how well they can get the gas to flow too, but I am now absolutely opposed to flow testing until they have done some sort of deal which injects enough cash to to enable them to organize proper testing for the 5 or 6 wells which could be re-entered with the right equipment to stimulate where appropriate and then correctly analyse and measure the resulting flow of gas, condensate and LNG liquids.

I would also like to see them handover operatorship to an experienced operator (hopefully with unconventional expertise) so that Buru can continue the very exciting work of looking for unconventional elephants in the Ungani and Acacia and potentially other regions in the Canning.

Here's a few things to think about:
1. Testing one well at this point carries considerable downside risk. If for some reason such as equipment malfunction or even misinterpretation of the sand characteristics and subsequent inappropriate process, the test proves disappointing, this would put considerable pressure on the share price. I would not like to see the price head back down to the $2 mark and possibly below.
2. It has been apparent for some time now, though it took a while for it to sink in to MY thick skull, that Buru have a long term strategy in place to monetize this vast resource.
3. It is also apparent that they do not want to dilute the share capital of the company and risk having to do another CR when they are confident that they can develop the resource with the right partner. Maybe they will need to go to the market in the future, but I feel that the strategy is to bring in a partner to help prove up the resource whilst watching the SP rise to a more appropriate level to raise capital with which to make their contribution to the development costs.
4. Testing these wells will not come cheap, especially with the limited availability of equipment and expertise within Australia at this time. This situation will improve over time. I suspect the longer we wait, the cheaper it will get.
5. If they bring in a partner to finance these tests and more, it's still all upside for Buru. They have cash in the bank and the very possible outcome of significant upgrades to the gas reserve.
6. Lastly. If they tested all these wells now and then potential partners run the rulers over the results, they may actually get a lesser deal than that which could be achieved prior to testing. Personally, I'll go with the low risk option please.
7. While they have $40 million cash (at least) in the coffers, they can just do the minimum work program and make any potential suitors sweat it out. They have 11 years before they have to relinquish any part of their core permits. And what happens if they find an Ungani-like reservoir at the larger Yakka Munga prospect? They'll never need to ask for capital again, and maybe they could even do the gas on their own with debt financing.

There are other things I could bring up but even these are enough to call for a bit more patience. Once the election is done and dusted things should just start moving along hopefully.

Any way I look at it, this has been a great strategy for long term wealth creation for all Buru (and Mitsubishi) shareholders. In particular getting the State Agreement was a master stroke. Buru have all the cards now. Let them come and get us.

We will eventually learn how productive these vertical wells can be and if it becomes necessary (not totally convinced it will), we will learn how productive a 1000 odd metre horizontal well can be.

On an ever so slight tangent, I was looking at an Exxon presentation today and these guys have unconventional drilling and completions absolutely humming along. I was staggered to learn that one of their rigs drilled 29 wells in a single year! I think this was in the Bakken shale-don't know the detail, but 1 well every 2 weeks?. Anyway, their presentations are very informative in many ways, and pitched in a way which makes it quite clear what they are trying to get across. Their website is recommended reading.

Anyway, I hope this helps to calm some nerves, and also serves as a kind of penance for being so wrong about the strategy. There you go.

Cheers