From SH - view on CENFrom NK2012. A good way to look at CEN and see things in perspective. This is O&G guys. Keep your eyes on the ball not on the inevitable dusters (if you could call song B a duster that is).
The market said that PRE was a $3 stock and I was stupid and listened to the market.
The market said the PMG was a $6 stock. I knew enough to ignore the market on that one thankfully.
What is similar between the 3 companies is that they all have the money to drill, the prospects to drill, and the commitment to keep drilling. Each has their own risks and those risks should be weighed accordingly to the potential returns.
my risk stratification model for Songkhla.
risks:increasing water cuts over time, ESP failures and workovers.
the prize:7000 bopd online assuming 1 well is offline any at any given time.
-the platform still has additional slots available to add more production wells to either the Songkhla
Oligocene, the Songkhla Eocene main or the 2nd Songkhla Eocene fault block target. The point is they
have development potential to maintain atleast 7000 bopd from this platform for the next little while. Atleast
long enough for their other exploration and development programs to bear fruit. At $80 WTI I'm modelling
what 7-10 k bopd production is worth for my own analysis.
my risk stratification model for Benjarong.
3 wells @ $4 million a piece so lets say $12 million. What does $12 million buy us? It buys the chance to go after some big reserves.
Benjarong Oligocene targeting 144 mmboe
Benjarong Eocene targeting 17.5 mmboe
Benjarong East targeting 22 mmboe
Other than PMG's Corcel/Guatiquia drilling, I don't know of any other play in Q1 2010 where you can risk $12 million from cash on hand against 183 million barrels in potential reserves.
risks: 3 dusters. Theres a good chance that this could happen. The original Benjarong well logged 60.5 feet in the
Eocene but permeability was a concern. The Oligocene (which has been proven from basin wide well
control to be a better resevoir) wasn't pentrated by this wellbore. Thats why they need a second well for the
Oligocene target. But the original well does mitigate some of the Oligocene risk as it demostrates
the migration of hydrocarbons in the immediate area. So the real risks come from seal and
trapping geometry in the Oligocene target and resevoir permeabilty in the Eocene.
the prize: 3 chances for success. they get lucky on one the 3 targets and get another 10k platform up in the near
future.
my risk stratification model for Bua Ban.
Its an undeveloped target with certified 1P reserves coming online in Q2 2010. Its not a 'sure thing' as GS suggested. It lacks production history. But any new well or field starts off like that. Nothing in the O&G world (or life for that matter) is a sure thing. But Bua Ban does have certified 1P reserves with reasonable seismic and well control. The platform is up and ready and they have the cash and rig available to drill the 6 development wells on schedule starting April. Now ask yourself if that development 'potential' is being priced into the current share price.
CEN is a full out O&G play w/ all the risks inherent to the O&G world weighted against 3 potential near term rewards
(1) strong netbacks and cashflow from Songkhla A
(2) potential high impact exploration in the near term
(3) low risk cashflow potential from the Bua Ban development
Thats my investment thesis in CEN and thats why I invested in the company. Everyone else needs to run their own loss:gain numbers or risk:reward model and determine their own comfort level and either stay, sell or buy more based on their own analysis.
But please don't buy CEN (or any other O&G stock) if you can't handle a duster or the markets predictable reaction to one.
The board members should be allowed to express their opinions both good, bad or otherwise. But theres no place for whining from speculators that bought in and expected to double their money in a week or two based on a single news release from Song B. These are the same guys that buy a pharma on Monday and expect it to announce the cure for cancer on Wed with FDA approval on Friday. Things just don't work that way.