Nicely put, Occam.Another informative way to look at it is that...

Nicely put, Occam.

Another informative way to look at it is that a probability of success of 30% is identical to a probability of failure of 70% (and you wouldn't want to walk across the railway track at those odds..)

That sort of risk of failure comes with the territory in oil exploration, and is acceptable to companies on a per-well basis. But this is not because the rewards for success for an individual well are large, but more importantly because a competently run company will get to drill many exploration wells in its lifetime, and the overall probability of every one of these being a failure is actually quite small. In fact, if they drill ten prospects, each at 20% POS, one is of these very likely to be a success and a potential company maker. (Even EGO has eventually demonstrated this).

For an individual punter though, betting a significant amount of their money on the outcome of just one single well, where the Probability of Failure is 70%, is taking a very large risk indeed, so the potential upside for that well has got to be very high for the gamble to be worth it.

That aside though, what shocks me here is people's apparent complete disregard for the factor of country risk in the equation. It is treated as a non-issue in the discussion, even though there is a very nasty war going on in the adjacent country, and the country where the well is to be drilled has just had a revolution and does not have a stable, elected government.

That is country risk of a very high level indeed! So the prize has to be immense to justify that sort of additional risk.

And how do you treat that risk? Well, mathematically you multiply it by the technical risk and see how you feel about the resulting figure. But you cannot do that, because you cannot put a figure on it. All you know is that it is incalculable, but alarmingly high, and changing on a daily basis. Which to me says: "I no longer fully understand the issues at stake in this investment, so I take my money off the table".

Or looking at it another way, I ask myself: "Would I send a big chunk of my hard-earned money on a three month holiday to a country where I wouldn't take the mother of my children?" To which the answer is "..urm, nope!"

Good luck!