itc drilling oil, page-9

re: itc drilling oil/ 618 Hi nobby_clark/manz,


so because ITC are only operating in the cooper
i am right in stating ;

"yes over the long term that success rate is expected to peter out.
i remember reading the current success rate in the cooper is averaged at 40-44 %.
so thats probably why they have used the 40 % assumption."

I'm not disputing what you are saying, but I am concerned that they are using 40% assumption to forecast their future revenue growth. Way too much "blue sky" value in those numbers for my liking. All you need to do is look at Hardman in Mauritania, they hit several huge discoveries in quick succession, so the market started factoring in 30-45% COS in 2004... what happened? 1 out of 4. In 2005... 2 out of 7 (Labeidna to be appraised while Faucon is not commercial in its own right). All I am saying is that it's dangerous to rely your revenuw growth on the fortune of the drill bit, which can change quite drastically from very good to very poor in no time.


my point was an assumption of $55 bbl oil is low.
as a mug i see oil closer to $70 over the next 12 months

what do u rekon?

This is a very subjective topic. Personally, I am only using US40 per barrel in my NAV calculations as well as DCF model. I use that to determine my entry points. If oil price stays above that, my risk of a loss is much less than if I assume a much higher oil price assumption. On one side, you have the US inventory building, and some signs of a possible economic slowdown in China. On the other side, you have historical high demands which is partly caused by the Chinese building their strategic reserves, etc, and unforeseen events like the hurricanes, terrorist attacks on oil infrasturctures, political unrests in countries like Nigeria. Then you have to ask yourself questions like just how elastic the demand is? At what price will the global economics be dampened? Too complicated to forecast oil price IMHO, which is why it is so much easier simply to assume a lower oil price assumptions and go from there.

what are your other shares you into?

I am very heavy Hardman, been fortunate enough to hold them before they started drilling in Mauritania, with CHinguetti production starting last Friday, it's been a long (5 years) journey. I'm quite heavy on VPE because I like their mix of assets, and am not deterred by JK nor the no of shares outstanding. I'd expect them to post pretty good numbers on the back of JImgemia, Mirage, Donga, Flour Bluff and maybe Eagles. I also hold GBP as a pure exploration play. They have a significant stake in Kenya where Woodside is scheduled to drill a minimum 2 wells later this year (still looking for rig slots). Both prospects identified are 1 billion barrels prospects. It's a fairly illiquid stock and takes time and patience to built a decent stake without disturbing the price too much. I'd only sold my Beach Petroleum last week as I viewed them as fairly fully priced at over 1.20's, but it's still a good company. I also hold a couple of UK shares - Soco (LSE:SIA) and Dana (LSE:DNX).

HTH...
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