Candax Energy Inc CXEYF

To buy or not to buy.

[OceanRanger1]

Well I suppose that's what makes a market. I see this as an attractive entry point and I don't see any risk of the deal not going through. Time will tell who was right but I am convinced that this is good value at these levels and my money will go long with a full position.

I looked in the annual report and the Madagascar lease was extended by 12 months to July 2010 by which time it was supposed to be drilled. It looks like that prospect is gone but it's really not a match with our core assets anyway. The new team can decide whether it's worth pursuing an extension or not. 

I made another mistake - the best case for Chaal was almost 1 tcf of gas and that was the big prize that we were on the verge of proving up. We already have the well drilled but let's hope the damage to the well-bore isn't fatal. There was gas there and the resevoir thickness was around 300 feet thick but it was never flow tested. Work-over, side-track and flow test as soon as production is re-established and the fields are optimized. With success at Chaal we smash my 2 year target.  

Production start-up is priority one and definately won't take two years but there were several issues with the El Bibane field so that is the biggest risk in the near term. The last team couldn't solve the problems so the new team is going to be tested right away. The parent company of our new partner just so happens to be an expert in solving the problems we have with our existing assets.

I still think they will have their hands full solving the problems on the existing fields that's why I think it will take a year to optimize production. It will take them some time to assess the situation before implementing solutions but how much production can be brought back on with a quick band-aid solution is anyone's guess right now. The last well at El Bibane was shut in because it was producing more sea-water then oil due to a fracture in the resevoir.

When the deal closes we gain $13 million in cash and a very strong partner with expertise in high pressure drilling but we also get 145 million more shares on closing. Further dilution could occur anytime within 1 year from the closing date where they have the option to redeem warrants for up to 87 million more shares at market. Our share of the pie is shrinking but the size of the pie should be increasing with any luck. 

That's the way I see it. Just my own opinion. Time will tell.


OceanRanger