why i sold bur and mr steve you are welcome

Mr Steve

Firstly you are welcome to have had the opportunity to have acquired my BUR shares. I hope they do better for you than they did for me. Trust me I am not pleased to sell at a significant loss, but in my opinion they are going lower.

This will be my last post on BUR unless there are new developments - I don't want to be accused of downramping (although you will) but I will point out why I have given up on BUR and sold out.

Go back 12 months when the company had just raised the funds for the current drilling. There were significantly less than 100m shares on issue, $14m cash in the bank and a lot of hope.

Have a look at the Sentinel research report. Burleson wells were meant to produce at 5mmcf/day initially and Champions wells at 15mmcf/day. Payback was a matter of months at lower gas prices than today.

Now reflect on the current position. 4 wells drilled, 4 gas finds, but this was never in question. The reality in my opinion is that the drilling is not economic. Marathon, a major highly experienced industry participant, gave AKG the opportunity and AKG passed the risk to BUR for a reason - drilling these types of wells is challenging, costly, and unless everything goes well, marginal at best.

4 wells finding gas yes, but cash in bank is now $4m instead of $14m 12 months ago. Forecast revenue is $0.4m/month. This will be supported by Marlin, but will then drop off given the production curve for these types of wells. Current wells, in the medium term, will be barely enough to cover admin costs.

Simply put the wells have cost more and delivered less gas than planned e.g. Rocket was initially 4.8mmcf/day and Jet 3 was 8mmcf - a long way from 15mmcf/day. We all know the wells took longer to drill, less horizontal play than planned. The net effect is uneconomic drilling, and BUR shareholders have paid for this in the share price.

I will put the previous run up as over-excitement. A cynic would say it triggered performance hurdles and enabled some of the convertable notes to be converted. There are now 111m shares on issue, and still $2m of convertible notes. Therefore despite inaccurate information posted, cash per share (net of the convertible notes) is only $2m or less than 2c/share. If you don't want to take off the convertible debt and want to convert instead, increase the number of shares on issue and you get a similar result. I am ignoring the Class C shares which would further dilute existing shareholders, if converted.

Admin costs are around $0.3m/quarter, using up a chunk of gas revenue, particularly after initial gas spikes settle down.

In my view there will be enough cash in the bank and revenue received for 2 more wells before there is a call on shareholders or a placement, further diluting existing shareholders.

There may well be a short term spike on Marlin's initial flows. I thought about waiting for this before exiting, but given current market conditions I don't expect a huge bounce and decided just to take my medicine and get out. I hope for all shareholders the flowrate is close to the 15mmcf/day targetted and that BUR can build up its cash reserves. I remain sceptical and expect only a slight build up in cash until the next well is drilled.

As I have said, just my opinion and good luck to holders, but now you have my reason for selling.

Mr Steve, save your post and save mine and in a year let's see how things stand.

Just my opinion
Monty