VIRGINIA HILLS OIL CORP VFGGF

RE:RE:RE:RE:Penn West comments about slave point- 9/18 - Q2 2014 results

[ofirme]

I bough a bit more, if that helps... at this point this is a wait and see situation. you need to prove
 durability of the production. waterflooding is working so far at the first two projects (from 2012 - 
 Evi projects) and it seems that the story of 12 months to complete response was just a nice 
 story. it took about 24 month for the first two. I assume that most of them will work. it sounds to 
 me that the company was trying to rush things and they overpressurized some of the wells,
 which caused those setbacks and now they are fixing the situation. there were 3 projects in the
 middle of 2013 and the two largest ones were in november 2013. if they work within 24 month
 it gives us a few years of durable flow. in the meantime pennwest is derisking the area.
If pennwest succeeds in showing the longer term value of their slave point, it would be worth it 
 for them to buy pinecrest at a higher number than now. now they would have to assume debt 
 for land that is still being proven. they are reducing their balance sheet, not expanding it. 
I still think that the ultimate arrangement will end up being someone doing a joint venture for a
 few tens of wells and getting to pay a fixed amount for that (will reduce debt by 10-20M and will
 improve the loan metrics) and will get some upside in event of a sale of the company and the
 land. it would be equivalent to a bridge loan with benefits for a financial investor. the issue 
 with that could be the track record of this management. they made many promises without 
 actually following through or explaining what went wrong. anyway, that is my opinion and time
 will tell if I am wrong or right.