Mr Horn-My take on Vulcan's dealMr Horn,
You make some interesting and sincere points...I like your open and unbiased attitude.Again, kudos to Vulcan management for
putting this deal to bed.It is no easy feat to get companies to spend money in largely untapped or wildcat situations. This is a giant
first step in what will hopefully be a very successful exploration program for Vulcan....with this deal. It is my view that Daval
would be very reticent in entering into this agreement unless previous geological and seismic data (government sponsored) in the
general area would have suggested exceptional hydrocarbon potential.We are all quite aware of the expensive proposition of
drilling offshore wells.
The news release is not overly revealing, however, it is customary of oil exploration companies to be stingy with information
especially in unexplored and underexplored areas.Standard practice is to hold your cards close to your chest for reasons of
competitive advantage.My suspicion is that this is what may be happening here.In all fairness then, it is hard to be critical of the
announced deal.
The following statement from the press release looks to be very carefully worded:
"The agreement provides Daval with the rights to earn, in stages, up to a 50% working interest in the above licences for
carrying out a seismic program, including the acquisition of new seismic
on the licences prior to December 31, 2001"
While some individuals are trying to fully interpret the intricacies of this clause, or to tease out significant detail , I suspect that
there are many conditional elements therein, in favor of Vulcan.Time only will tell.
So what, if it Daval ends up with 50% of the properties...I would expect that Daval will be just as interested as Vulcan in seeing
that one or more wells will be drilled if the seismics identify the kind of structures on Vulcan's acerage that are known to exist in
the area.How are we to know at this time that should the seismics prove the existence of significant potential hydrocarbn
structures , that both Daval and Vulcan relinquish an equitable percentage of their interests to bring in a JV partner to drill the
properties.Mr. Laracy has often been described as an astute chess player....always three steps ahead of his opponent.I am not in
the least worried that too much has been given up in this deal...as some posters suggest...based solely on my confidence in
management.The statement I quoted above leaves many unanswered questions....by design, I suspect.
Irregardless, I personally see the deal as a very significant event for Vulcan.I stand to be corrected, however, I am not aware of
any other Nfld-based junior exploration company ever signing a deal on the province's offshore front.Another milestone for
Newfoundland's oil industry, and indeed for Vulcan.
It is my belief that this deal will prove to be an episodicdevelopment for Vulcan in its pursuit of significant hydrocarbons on the
West Coast.
Regards,
len