High Impact ProspectsReviewing all the wells drilled in the...

High Impact Prospects
Reviewing all the wells drilled in the Counties surrounding where MAD operate: Stockanalysis have captured the range of possible outcomes with their expectation of 50-500bbl/d IP. However at the lower end of that scale the wells will not provide an economic return on capital given the cost of deep wells ($1-2mln). Decline rates - which cannot be independently assessed without more details - will be important but for a "high impact" prospect to provide acceptable return I estimate it neeeds a peak rate of 200bbl/d+. Based on all the vertical wells drilled since 1/1/2000 there is a 6.5% chance of them meeting or exceeding this, therefore on a risked basis they would be far better off drilling the proved reserve.....if they exist.


Data availability in the USA
It seems many people are not aware of the level of data publically available in the USA. For old fields like these there is access to monthly production history, but completion reports, well logs, instantaneous tests and open access seismic. The company will have more data but this cannot explain to me why I have such difficulty reconciling their reserves.

I have carried out enough reserves determinations to know not to claim mine, or any is "100% accurate" - not even sure what that means. I have done similar evaluations for other ASX listed companies with reserves in USA and Australia e.g. AUT, AMU (now Lonestar) and COE (in SA,WA and to a lesser extent NT there is good data publically available) amongst others. In all cases I have been able to get to within 15% of the comapany's stated reserves and this being the case I just assume their values are correct. I couldn't get anywhere near this with MAD which is why I see such a great shorting opportunity.

RE the quarterly:
I am expecting the quarterly to follow the same pattern in has for the last 18months i.e.
Average results showing a net reduction in cash - this month I am expecting in the order of a $9mln drop in net cash
Production data is largely out there already, but they will put in the usual statements about how it got much better after the quarterly period and will be much better next quarter (made in previous quarterlies and ultimately not been sustained)
Also expect them to talk extensively about the gulf deal without giving any real details about how much has actually been firmly committed.

In my view this company has at most 18months to live without fresh equity unless a number of these "high impact" wells comes in, and the statistics are heavily against that.

Because someone mentioned the Thompson field: I not a piercement type structure, it is just a four way dip closure which makes it more conducive to CO2 flooding. Further it is producing more and a simple decline curve on the field production leads you to a much higher reserve number than for MAD.
Short