My analysis of trading yesterday.Yesterday was a good example of the push to the top of the first plateau of speculation and enhanced euphoria due to the overall timing of good markets. The lead up to drilling 5 wells, waiting for results from testing of the 1st well, and if I might add, all very successful, led to an inflated speculative push to the top based on limited selling as people waited to see what was going to happened, and then coupling this with amazing and relentless buying by Byron (coupled with their reports) and Mackie. Then yesterday, a press release in a sideways market that eventhough the first well is excellent (4.5 MMCFD) and the 4th well has apparently hit and cased (however no data of length of pay horizon was provided - which I find rather strange), and already drilling the 5th well (which likely occurred over the weekend), the PROFIT takers emerged in full gear, selling, selling and selling. Let's face it, everyone who bought lower were in profit (me included). But also one more thing happened on the way to the bus stop, there were a lot of speculators driven into buying last Friday given the speculative anticipation that I suspect many of those sold yesterday claiming the old Pump and Dump, got SUCKED in, etc.
Now today - over the last month there has been 26 Million shares sold (and bought!). The play seems classically a very serious discovery play with hitting on what seems 4 wells (100%). Even the first well at a sustained 4.5 MMCFD with condensate would mean upwards of $5M revenue per year (and the Rose report suggest this could reserve out around $16M per welll). The second well could be better, and so we look to the big money to suck back the loose stock and consolidate the play in this area, perhaps
.40 to
.50 range (in come Byron and Mackie). I suggest two things here, 1) the selling will lead to exercise of warrants, thus more cash in the company (this is a great thing and will likely be announced soon), and 2) they are arranging a financing at some price yet to be disclosed which will provide the capital to push in perhaps up to 10 wells in one prospect, and total revenues in excess of $100M (let's say 50M per prospect per year and there are 7 prospects in total). 10 wells will not take very long to drill, in particular if they move a second well into action.
My conclusion: my fellow investors, this is far from over, hang on, play hard, buy and sell but I suspect this is going higher once a financing is announced and completed. However, the timing cycle has been disrupted and all of this will be slower and more measured, which isn't a bad thing, making money is good, it just may take longer. I doubt this is going back into the
.30 range. Let's see where the new floor is nailed.
Those left of the bus will be happy, those that got off will likely be back on and off a few more times. With each upward swing in price and subsequent consolidation the volatility will diminish until this become either a real producer or bought out by a senior oil/gas company.
Any comments?