Its Too Early to Write Off Black BassSee below excerpt from a RayJames update on IOC that was put out yesterday after the news:
"InterOil: No Results Yet; Drilling Continues to a Second, Deeper Objective
♦ In providing a third drilling update about the Black Bass prospect, InterOil has announced that the well
has reached and subsequently penetrated its first drilling objective at 3,900 feet. The company has not
yet tested this objective to determine whether or not it will be productive. The company is continuing to
drill to a second, deeper objective at 5,700 feet. This exploratory well is penetrating previously undrilled
horizons in this area, so the goal is to test and learn as much as possible from every well.
♦ The anomaly viewed on seismic data, which had been originally interpreted as a limestone reef, may
now be correlated with the sandstone that the company reported in the drilling update. This does not
imply either a negative or a positive result. We would note, however, that sandstone, as a rule, tends to
be more porous and, hence, a potentially more oil-prolific hydrocarbon reservoir. This can, therefore, be
viewed as a net positive, though again, it does not imply any commercial discovery.
♦ The well is currently drilling at 4,600 feet, and if the company is able to drill at the same rate as it has
over the last two weeks, we would expect the 5,700 foot depth to be reached within 10 to 14 days. Once
that depth is reached, wireline logs will be used to interpret the hydrocarbon potential of any objectives
encountered by the wellbore. Further testing would be required to determine commercial productivity
following any positive indications from zones identified on logs.
♦ This drilling report, along with the previous two, presents strictly factual information. The reason for this
highly technical style is the company’s desire not to present any interpretation or analysis that could
perceived as misleading.
♦ Bottom line: This latest update is not yet a final result, but from our perspective the news is a net
positive. A sandstone could be a potential reservoir in a section with known gas content, as was
indicated in the drilling report from two weeks ago. The fact that the company is continuing to drill to a
deeper objective should be interpreted as a sign that the wellbore is in good shape, and the company
should test as much formation as possible."