insider trader-stock pick of the week - 06feb, page-32

I think nihilism and I will clearly have to agree we have different views on this stock which is fine. However to provide some factual correction and background:

I have looked at production from Het lime in the region, all the intersections I can find are sub 2000ft, a number of the wells Maverick drilled TD'd at more than 5000ft. As they intersected Het lime in both I am inclined to think that the deeper well also encountered deeper stratigraphy. I cannot find anything conclusive to say the Het lime is only at ~2000ft however I will take your inability to provide a reference as indication that you are also unable to substantiate your claims. While you are right that there are usually steeply dipping formations on the flanks of salt domes my understanding is that the salt has not risen to and therefore deformed the level of the Het Lime materially - as I have said I don't have conclusive evidence for this and am happy to be proved wrong

Just because their primary target was the Het I don't think there would be anything anything wrong or misleading for them to test deeper formations at the same time so I am not sure what the argument is here?

Google "mathematical definition of rate". I am afraid you are wrong. I find all these arguments about what valuations would be if production were higher somewhat strange. Yes if production were higher the reserves life would be lower (though it would have to be raised over 10 times to bring it reasonably in line with the rest of the industry). Similar with the argument, P/E ratio would be more reasonable if they could get their earnings up. Yes it would be, but they are failing to achieve that so until it does you are paying for success they are struggling to achieve. Read my post properly, I only applied this metric to companies with production.

The key about this metric is that production data is one of the most important kind of data operators gain about oil fields. As you ramp up production you get more data, your confidence increases and that is the appropriate time to increase your 1P reserves. Even Oil Search who have the most justifiable reason for being anomalous on this ratio (i.e. they have a large LNG project that will produce largely from established fields coming on stream shortly) has a reserves life that is less than a tenth of MAD's.

Impellers in these wells??? These are beam pumps (aka rod pumps/nodding donkeys) not ESPs; beam pumps are positive displacement pumps, there are no impellers. On the up stroke the effective pressure at the bottom of the pump (not necessarily reservoir level) is close to zero, not exactly zero but as close as you can get with artificial lift, my point was simply that reducing skin damage doesn't add much under these circumstances. Also friction has next to nothing to do with the pressure drop in these wells, the total fluid rates are less than 100bbl/d of which a significant amount is water and next to no gas, almost all the pressure drop is gravitational at these rates.

Porosity has nothing whatsoever to do with this pressure drop. Permeability is related to pressure drop from the reservoir to the well bore but nothing to do with the pressure drop up the wellbore. I don't understand the point about drilling high porosity sites.

In the 1940's a lot of these onshore salt domes were discovered by the use of gravity data. Salt has lower density than most other rocks (hence it rises up and creates the domes and structures). When taking gravity measurements there is an anomalously low gravity reading over the structure where the salt is which is why they were first drilled. As I have said, it makes sense for them to use the 3D to define the "high profile targets", however vertical and lateral seismic resolution are unlikely to add anything material to the known and developed intervals given the well density.

The whole argument about technology is moot. The graph I showed has technology changes implicitly built into it. i.e. the average EUR for wells drilled in 2000+ obviously includes technology that was used in 2000+.... as the 1970 average EUR includes whatever methodology was applied then. The average EURs are falling because of depletion in spite of what technology adds.

I also don't understand your comment about 1P is 95% probable reserves. 1P should be equivalent to P90 i.e. on a probabilistic basis there is a 90% chance you will produce the stated volume or more.

You and no one else have to believe me, I am only posting my analysis. I get all my data from searches on the Texas RRC.