keeping a lid on it

Hi all

Along with most other posters in this group I've been a little frustrated lately at the disparity between what we think we have here and valuation of same by the market. So I’ve gone back over a few BRU announcements just t o allay my fears.

My thoughts:

The only thing stopping the share price from sky-rocketing is the lack of a definitive flow test after reservoir stimulation at Yulleroo-2. We all know that they have a huge amount of gas, with a high percentage of liquids content, on their permits. But can it be produced?

I went looking for a definitive flow rate from the stimulated Yulleroo-2 well. Here’s what I found:

"Evaluation of the Yulleroo accumulation is ongoing, with testing of the Yulleroo-2 well having recommenced with continuing encouraging results. The results of the current testing program are expected to form the basis of an independent resources and reserves assessment to be undertaken later in the year." Operations Update 3 March 2011

"We still don’t have all the stimulation fluid removed yet, but it is now flowing consistently at about 0.3 million cubic feet a day with significant condensate. This is a very good outcome for us as it demonstrates that the reservoir will flow consistently after a limited stimulated [sic] program." Company Insight interview 30 September 2011

However, it seems to me that the people at Buru are extremely confident that Yulleroo will be developed. From Independent Yulleroo Field Resource Assessment 27 May 2011: "RISC has estimated a mean resource in the Yulleroo field of 352PJ of ultimately recoverable gas based on Contingent Resources in the Yulleroo field of 53 PJ and 846 PJ on a 1C, 2C and 3C basis respectively." And this: "Importantly, the mean estimated volumes identified by RISC would be sufficient to support the development of the Great Northern Pipeline, allowing development of any additional discoveries made during Buru’s 2011 exploration program."

It is my feeling that knowledgeable people in the oil and gas industry would suspect that Buru are sitting on gas reserves of at least 5-10 TCF, with associated liquids, and probably at least 100Mb of conventional oil. But as other posters have noted, you can’t really take these suspicions to the board and say, “Hey, we should buy this company Buru Energy -they’ve got Sh___loads of oil and gas and we can get them for a cool $750 mil.”

It seems to me that maybe we don’t really want a definitive flow test right now. Maybe we want to determine the areal extent of the known tight gas reserves before we let the market know that it comes out of the ground just fine, in fact, better than fine.

A conspiracy theorist might suggest that this is the reason that the Alcoa agreement was extended and why we haven’t heard much about conducting a less limited stimulation program-this extra 12 months will let us prove up a basin-wide accumulation before we actually have any reserves on board, which might lead to an unwanted takeover offer.

Note that back in 2008 Sunshine Gas and QGC were taken over at around $1 per billion cubic foot (1 $Billion dollars per TCF) of CSG, with zero liquids content. Given the relatively high liquids content of the gas discovered to date in Buru’s tenements, I think we are looking at much higher number than 1 for Buru.

I can’t see how we can go wrong with this investment if we are patient. I’m averaged in at about $1.2 and I won’t be selling any shares until I get at least an order of magnitude on this, and I expect to far exceed this goal.

I hope this helps and Good Luck on the Buru Energy Superhighway.

PS. I sold my 100000 SHG at an average of $0.55 from memory. Doh! Not gonna do that again.

Phil
BRU, NSE, GOR, BPT, KRE, PBT