a) There are many targets so a dry hole (Poor term given that its offshore drilling) doesn't necessarily have a massive impact on the prospects of the other targets in either block. However we are largely free carried for 2 holes. These holes cost big dollars. A failure on the first puts much greater presure on being successful in the second. While failure of both again doesn't mean the leases are worth less, it would mean that NEN's financial commitment to participate in further drilling would be significant and that there would be no short term catalyst for SP growth given how long we could expect to wait before the partners agreed on what next. Success on either of the first 2 holes means higher SP and the funds for subsequent drilling shouldn't be an issue. We need one of the first 2 holes to be successful to support the SP in the short term.
b) Stop losses can be self-fulfilling. Automated bots are often trawling around stocks like this looking for stops. Its a simple game in low liquidity stocks, sell a few shares into the first few lines of a thin buy queue to see if you can trigger some stops. Those stops then create a cascading domino effect as the dumping from one stop causes the next to be hit etc. That how you get those flash crashes in a given stock and it often recovers byt he end of day. The algos then pickup the cheap stock being dumped as the stops are triggered. They can see fromt he market depth where they need to position their buy orders and they can get them in there in a fraction of a second. Moreover since the algo can be polling for stops, they know when and where it is likely to happen. Stops are useful but dangerous in this environment where algos seem to be able to get away with anything.
NEN Price at posting:
32.2¢ Sentiment: Buy Disclosure: Held
