Hi holdersWill discuss the West Tulsa announcement, hopefully...

Hi holders

Will discuss the West Tulsa announcement, hopefully this helps a few holders; sure many of you will know much of this already.

West Tulsa Announcement

Moebius #1-28 delivered initial production rate of 47 BOPD and 50000cf of high BTU gas
Moebius #3-28 well is still returning load water with good shows of oil and gas

Guys, during recent conversations with brokers, large holders and oil experts, I can?t believe what I have missed just in those 2 sentences.

Ok, Moebius #1-28, my first thought was to calculate revenue.
Using an oil price of US$75 per barrel (currently $80), $3.80 per mcf and an operating period of 330 days a year we get
OIL- 47x75x330 = $1163250
GAS-50x3.80x330=$ 62700
Total $1225950
I assumed this was for the first year and was sales revenue only
Well, as usual I had no idea, just skimmed over this line, but the main word there is "initial".
Further on in the announcement it mentions these initial production volumes are in line with planned lower initial fluid movement.

It has been suggested to me as this is only an initial flow rate, this well is still stabilising its optimal flow to get the lowest possible decline rate, so a better figure to use is 30 BOPD for this well.

Using the new flow rate of 30 BOPD but leaving gas the same, we get annual sales revenue of approx $800k.
This well on its own will bring in sales revenue of $200k per quarter, with a well drill cost of roughly $350k, this well will pay for itself in 6 months, after that its money for jam.

Moebius #3-28, still returning load water with good shows of oil and gas, once again I didn?t know but this means this well was recently fracced, we are currently still pumping out the fraccing fluid but still getting good shows of oil and gas, this is a good sign.
We should get an announcement in the next week or 2 giving us the initial flow rate on this well, hopefully when it stabilizes its flow we will get approximately the same revenue as Moebius #1-28.
So, these 2 wells will more than likely bring in $400k per quarter, great news.

The next section talks about Moebius #2-28, the water disposal well plus the completion of production facilities for a second central delivery point. This well will support up to 20 new wells, at $350k per well the less of these required the better, hence the saving of $60k per quarter.

So far this announcement has mentioned revenue bought on line and costs lowered, all good.


Now the last 2 paragraphs talked of 1P reserves increasing 85%, the 2P figures and importantly an additional 36 proved, probable plus possible development locations, of which 16 are proved undeveloped (1P)

I will do my best to explain this as it was explained to me.
When the reserves where calculated last year, we had 5 wells drilled of which, Fuss #2-33 was a water well.
Draw a square and put the 4 producing wells on the corners and the watering well in the middle of this square.
In the past year we drilled an additional 5 wells, put 4 of these inside the square and then the 5th well outside the square, Moebius #2-28, the new watering well.
This would have increased our 1P reserves and taken them from 2P and 3P reserves, but more importantly has created the additional 16 1P targets and 36 overall.

Basically as we drill more wells at West Tulsa outside that initial square the more 1p and 2p reserves we will have. A possible explanation for the increased 1P reserves and decreased 2P and 3P reserves at West Tulsa.
Guys hope that made some sense, certainly sounded good when it was explained to me.

As a summary, 2 new wells on line bringing in approximately $400k per quarter sales revenue, the new watering well will hold up to 20 wells of water, reducing the need for future watering wells for the time, reducing costs per quarter by $60k and 16 new 1P targets and 36 new targets overall.

To me, this was yet another great announcement.

This has a significant bearing on the next subject, possible strategies