my take on the situation

Hi MEOmites

There has been some lively discussion regarding the recent CR and understandably there has been quite a bit of angst from all quarters - both LT and ST.

Why this is happening is because the driving force behind the SP is the outcome of the present Artemis drilling operation. There can be only one of two results - success or failure. The CR was completely out of left field and took everybody by surprise. I think it was a very good move for management to make the most of the upward momentum when the end prize was still realistically a 32/68% COS. To lock in 52 cents of value via a targeted placement was just an exercise in sensible risk management relative to the 32% COS at Artemis and can only strengthen the LT prospects of the company whatever the outcome of A#1.

That doesn't mean that the prospect of success is not high in the geological assessment of wildcat wells. A lot of work has been done and ae have attracted major interest.

The traders will play their games but Mr Market will bring the SP back to balance in his own time. Mid drill is always a hectic time especially for those that don't have the appetite for risk - especially when they look at a company in a singular fashion as they are with the drilling of Artemis. The same effect is happening to the SP of the PPs. MEO's CR can't be blamed for the action on CUE and PBR. But then we are always looking for someone to blame aren't we?

Whether the 52c was the correct value is open to debate but it was successful in raising $30m cash for the company and is now a historical fact so we must now move on but before we do I would like to look at the effect a CR has on different types of traders/investors.

Short term traders.

From a ST trader's point of view the CR was at the wrong time because it reversed the upward momentum of the SP at a time when they were just about to lock in profits. Once the SP reached a point they were happy with, who knows what would have happened to the SP but a correction was always on the cards after a ~140% rise over 5 months.

Look at CUE and MOG today - they are also in a correction mode as traders pull out. I don't think the drill bit has reached Calypso yet according to today's release. It is just a mid-drill exodus for those wanting to play it safe.

It is possible some ST traders now locked in but it is unlikely due to the fall in SP since the CR. IMO this is a sign that to take a smaller profit, break even or a small loss (depending on their entry point) was always part of their strategy. I don't think many would have liked to hold through the risks of the drill results. Their protective underwear is just as strong as kiwi's model only made of a different material.

IMO the big boys with their algos have even taken them for a ride.

A ST trader would always prefer management to place shares at the bottom of the market and never on SP strength because this upsets the upward momentum of the SP they create. This would keep management popular with the traders. All they want is a company to be a cash machine to trade on their terms. A good company manager should always strategize and place shares in the best long term interests of the company no matter how unpopular this may be.

A ST trader would have to admire the CR strategy used by the CEO in this instance even if it didn't fall into their plans. It is just good business acumen on the CEO's part.

It has been argued that a CR should not be undertaken if there is no immediate need for the money. I would argue that in the case of MEO, with no production income (yet) and an ambitious program, funds must be acquired when the opportunity allows.

Long term investors.

No matter what anybody says or thinks in the MEO forum there are still a lot of LT investors in MEO. Without this investor base the company would not be able to survive.

From a LT investor's point of view the timing of the CR was perfect in taking advantage of the interest the CEO mustered during his recent European and N American road trips. He had to take advantage of this interest ahead of the A#1 drilling result. With so many companies out there vying for the offshore dollar it is difficult for any business, let alone a minnow like MEO, to get their attention. We all sit at home thinking it is easy but it takes a lot of hard work. Just ask any manager in any business. To raise $30m in the present world climate is a master stroke IMO.

We have been saying for a long time that we need more serious, sophisticated holders at the top end of the SH list. I hope the CEO has attracted some first class investors who will look at the long term value of the company in the event of success. Where ST traders will bail to lock in the short term gain the new SIs could soak up this liquidity and bring stability to what we all know as a volatile SP.

The cash backing is now 18.5cps and, more importantly, the company has $100m cash on hand. MEO is in an even stronger position whatever the A#1 result.

We were looking forward to a $31.5m bonus from PBR on the success of Artemis. The CEO has been able to mirror this bonus and it is already in the bank, drilling success or not. In the event of success we will still get the 31.5m to give us a total $131.5m in the bank.

In an A#1 success case a SP increase will not be measured in cents but rather multiples of the current SP. The downside of failure is still there. We all know the risks involved but the actions of the CEO, by raising the $31m, will soften the blow.

The LT investors can thank the ST traders for causing the upward momentum allowing this CR to happen and de-risking our investment.

In-between trader/investors.

For want of a better description these are the people who dabble in stocks and shares but don't really have a strategy and consequently have a bad experience. This category does not include those who knowingly average down or lock in some of their profits as a de-risking strategy or free carry.

There are a number new traders/investors who visit HC seeking an easy way to make a quick buck and would rather not do the hard yards and research the fundamentals of the stocks in which they invest. Alternatively they join the TA's and follow their charts without a real understanding of the patterns and just follow their lead.

These inexperienced investors are the targets of the manipulators. They rub their hands together as the fresh victims come on board. This is why 85% of those who dabble in the market walk away confused and disheartened. I don't like to see these new investors fleeced of their hard earned money.

The experienced ST traders will mostly pick the right patterns to follow but can still be thrown by things like a left field CR. The LT investors will do their due diligence in researching the companies but they can also be thrown by unforeseen internal and/or external events.

A good strategist can allow for these hiccoughs but for the newbies the consequences of the emotional games leading on to indecision can be severe. They can be influenced by the 'sky falling in' syndrome and capitulate.

Like I and so many have said, we must do our research, be alert and keep on the right side of our trades. If the market appears to be unraveling our investments, work out the reasons why and plan an exit strategy if necessary. Unfortunately the exit decision can be left too late. If the horse has bolted, but it is of good pedigree, it will be soon rounded up to race again.

I don't like the negative spin that is put on trading by some that we should only invest anything we can afford to lose. If this is the case then we shouldn't be investing anyway and if we do then we haven't researched the various companies properly. Having said this I think it is important to realise that our money may be locked in for a while as a LT investor and some losses will always eventuate depending on the LT or ST strategies we use. The objective is to ensure our gains outweigh our losses and that we learn from our experiences.

I use the term experiences rather than mistakes because at any one moment the decisions we make are the best ones we can with the information at hand. Second hand information can be a problem. If we later find out that it was the wrong decision then we can learn from it, move on and be better investors/traders for it.

But enough of the trading systems, CRs and the like. Each to their own and let's hope we all make a profit from our investment choices.

Where does MEO stand

Like I said the other day I am now concentrating on the drilling of A#1 but I would also like to have an overall look at how the company is performing. To do this in brief we can look where MEO was a year ago and compare it what it is today.

In Oct 2009 we had:

$15.6m cash in the bank (3.7 cents per share) which was not enough for the WA-360-P well commitment

A share price of 60c. This was after coming out of an SP low of 7c up to an 80c high but on its way down.

A chosen preferred farminee, but they were not locked in and we were waiting for their Dec board meeting for a final decision.

A US$35m drill/drop decision to be made by Dec 31st, without the funds in place to for this commitment

A healthy SP but with problematic ST fundamentals of the company.

Government approval for the TSMP and TSLNG project with advanced feasibility and design studies completed.

Today we have

$100m cash in the bank - completely uncommitted (18.5c cents per share). Whilst today's SP doesn't show it, in uncertain markets, cash is king. The best time to raise cash is when it is not immediately needed. This has a twofold benefit:

1 it provides the company with the best possible leverage to place shares at the strongest possible price

and

2 creates an environment where the company is in the best placed position to take advantage of any new ventures that may come along.

Hopefully the CEO has attracted some sophisticated North American and UK based shareholders

A high quality farminee is paying 100% of Artemis-1

Along with the 25% free carried interest in Artemis-1 we will also have a 20% free carried interest in 2 follow up wells and a bonus payment of US$31.5m in event of success

50% of adjoining WA-361-P (increased from 35%) with a renewal application lodged

100% of NT/P68 (increased from 90%) with a farmout underway for 5Tcf Heron prospect whilst retaining 100% of the Blackwood prospect.

100% of AC/P50-51.

Increased depth of the technical team with Errol Johnstone (formerly one of ExxonMobil's top Structural Geologists), joining us.

Share price in the $0.40's

I think the company is in far better shape a year on. It is not reflected in the SP and is presently way oversold and is still a lot higher than 5 months ago.

As a LT holder I have been in these downturns before but the company keeps on getting better in my mind.

As long as management keeps on building a base on which the long term SP can grow I will be happy. Looking at the above factors we are in a far better position than a year ago.

I decided a long time ago to stay long in MEO. It has been a rough ride and I have been testing those undies just like every other LT holder. My cheeks are rosy red from the friction.

Hopefully this short term pain will result in a long term gain.

But that is just my opinion.

#:>))

PS Whilst putting this post together I have realised that I am answering various points put forward so I apologise for not joing the recent discussions directly.

And I agree, gjw1957, that the CR topic is getting stale but I just wanted to put in my perspective as another point of view.