positives, page-6

hi maelstrom, welcome aboard, getting in at this level must have been nice.

for a minute there by the lack of replies to my previous post i thought everyone was completely happy and had no questions at all!

i spoke with David tonight, 1 hour conversation, very in depth as there were so many questions i wanted answered.

Maelstrom, your question is one of the things we discussed.
David is in a tricky position here, in the past he has been told by brokers that news was released too often and that it was really too insignificant for the market so it had little effect.

When he did detail plans and targets circumstances changed and all of a sudden shareholders pulled out a big stick and beat him over the head with it. A classic example of this was a chart produced at last years AGM showing the number of wells on line after each year.

After this shareholders had a belief that this would occur no matter what but things have changed, the gas price is currently suppressed at a price that makes pumping new wells out unprofitable. Right across mid America smaller companies, either privately owned or listed, are getting into financial difficulty because of this.

Basically he has told me that announcements will be made as projects are completed, not what RFE plans to do in the future.

The announcement on 11/10/10 if read carefully gives us a fairly clear picture, a path has been chosen to best increase our reserves without depleting them, improving our completion costs and production.

remembering there is not much point in drilling these wells and putting them into production if we will make an overall loss on them, increasing the reserves will add value to the company, when gas prices improve we will be in a position to greatly increase production.

this announcement doesnt say we will drill 3 wells in West Tulsa in November and 4 wells at EOK Central in December or anything like that because basically setting specific targets like this has put David in the crosshairs in the recent past.

suppose all i can say is work is definitely continuing and that his number one goal is to bring the company into a cash positive situation, this is were West Tulsa will be very important.

news will flow shortly and holders will again see that RFE is overall in a very good position, capital raising is definitely not on the horizon.

what i do recommend Maelstrom is if you can, and this applies to all other holders, get yourself along to the AGM, David knows his stuff, quite impressive actually, and would be more than happy to answer any questions you may have.

regarding the quarterly result, my calculations were miles off as i obviously didnt have the full picture, suppose this is the danger of working out figures without vital parts of the equation.
the good part about those figures is that the production increased by 17%, this figure will continue to increase as the new wells continue to remove water from the wells aiding in the gasification of the shale, once again this was not something i was aware of but have a look at the chart on page 12 of the investor presentation released on 14/9/10, these wells wont be producing at there maximum flow rate for probably another 6 months, the devil is in the detail.

my assumptions for the quarterly figures also were that the 20 wells on line at EOK South announced on 29/3/10 were the only wells on line at this site, well there are roughly 80 wells on line here, but not all wells are operating at there optimum, the previous operator, Coranado, were not the best in the business, they had some wells at the wrong spacing or poorly completed, but the basic crux of this is, i assumed that with the 2 month lag in sales that this quarter we would times by 3 our production from the previous month, that would have been fine if we only had 20 wells operating but i didnt factor in the other 60 odd wells.

another point overlooked was that all these wells were down for 10 days while the upgrades were completed at the Wagoner A processing plant.

overall 17% increase was good with an expectation that this will increase next quarter, suppose we just need the gas prices to increase now.

another thing from the quarterly that we discussed that may have been overlooked was the statement regarding Moebius #3-28
"Moebius#1-28 has initial production rates of 47BOPD but Moebius#3-28 was still returning load water with a high fluid level but had good shows of oil and gas"

not every well will return the same flow rate, the fact that Moebius#3-28 is still returning load water and high fluid levels and is taking longer to stabilize means that this well in all probability will have higher intitial flow rates than Moebius#1-28, that is great news for RFE, especially with the price of oil at the moment.

Maelstrom, hope this has answered a few of your questions, will be happy to attempt to answer any other queries you have, but you can be assured we are moving forward without debt, with a low share base, with growing reserves and infrastructure and the team in place to take advantage of our great asset.

RFE is certainly undervalued, suppose we need investors who can see all the positives and are happy to hold.