Well this is the third whack in the rear end Petsec has given me...

Well this is the third whack in the rear end Petsec has given me this past year so I suppose I should just get used to it. Bit harder to take this time as I bought 50k in the last couple of days in anticipation of a better result. Should have known better with those sales in the United States last week.

Its not that bad a report, the company is still on track to produce around 5.5 bcfe this year which is growth. It now has a second field in production with a third and fourth field in their sights. That's progress particularly with the squeeze on US gas prices.

There has obviously been some problems getting the Vermilion G1 into production. The sand they are trying to complete is presumably the bottom sand which Forest Oil first found and which is probably under considerable pressure given it is at depth.

It could mean that the flow will be better than the G2 well when they eventually turn the tap on so hopefully they will get their 20 mmcf a day by mid August. The development well will add another 3-5 mmcf a day so by the last quarter (and for the northern winter gas prices) they should be producing around 30 mmcf a day net.

The production from West Cameron is disappointing given they have an extra three wells there this year. They don’t tell us whether current production rate is from all five wells but one assumes it is. They told us at the AGM that they had at least two more years of production at West Cameron though looks now like the last year might be at a rate of 1 mmcf a day!!!

But hey, the gas is no good in the ground got to get it out as quickly as you can and move on. West Cameron has proved to be the cpmpany maker for Petsec so guess we can't complain too loudly.

But it really would be helpful to have some idea of the number of sands that have been depleted at West Cameron and the number still to be produced.

Main Pass is smaller than I expected but will be profitable nevertheless. We need to remind ourselves that Petsec only produced 4.5 bcfe of gas last year and still made a profit of A$22.7 million. So I am quite happy if they end the year with reserves higher than the 23 bcfe with which they started and finish the year with production around 5.5 bcfe. And remember too their current strategy is still to go after "scraps"

Price action today reflects the disappointment of short term traders, average trade so far today is still only $5,000. I suspect we have seen the worst of the sell off and when there is a more thorough analysis of the results we may even see some buying come back. It is a reflection of today’s market place that everyone wants instant gratification!

Look forward to atomep’s clarification of the financial issues and remain confident that a stronger more profitable Petsec is emerging. They really do need to do something about investor and public relations though, it is still a very good story if told properly.

But it is also one for the longer term.