ARHT Media Inc V.ART.H

RE: RE: Nearly a month?

[GreatSwami]

"i wonder where all that seepage was from if there is no oil even after drilling that deep."

In a sense the oil seeps may be a distraction here? It is possible that the oil seeps at Qara Dagh may have migrated laterally from Tertiary reservoirs way off laterally down the flanks of the Black Mountain pericline? There is no necessity for the oil supplying them to have migrated vertically up from the Cretaceous reservoirs underlying the core of the structure. In fact it is better if that is not the case and that they are Tertiary sourced as that bodes well for the Kolosh shales having formed a perfectly good seal for all the potential Cretaceous reservoir zones. (Mind you that also sets up the possibility of a gas cap too?)

However if there was a significant gas cap - it is most probable that there would have been some drilling issues as experienced by Western Zagros to the south at Kurdamir-1 (and all its sidetrack attempts?)

But if the head of Niko is quite happy to talk about (oil) fluorescence in drill cuttings samples at their presentation in June - together with other encouraging signs - then I think its safe to assume that there is "Oil in them Thar Hills" - just a question of how much and how good the reservoirs are. We will only know that for the Cretaceous once they have drilling, logging and testing results for the 3 main Cretaceous reservoirs - and that is a ways away yet I think?

So it is premature in the extreme to say "there is no oil even after drilling that deep."

Buy hold or sell as you wish. To my way of thinking its early days yet. But at least we should be getting close to getting some news or a progress report?

On another matter I was thinking of valuing oil resources in the ground - as opposed to actual reserves - and i was thinking of yet another simple "thought experiment:" to highlight the error of "The Slithery One's" incessant focus on the Red Herring of pricing so called "air barrels."

Example 1: Company A is looking at a resource play. It is a statistical play recognised by the smart company reservoir geologists and engineers set in the middle of an emerging but reasonably developed fairway. The Company has bid on ten sections of land with an estimate of likely recoverable reserves of perhaps 400,000 barrels of oil per section and offset experience suggests that it will take a minimum of 4 Multi stage  fracced one mile horizontal wells costing some C$3-C$4 million per well to develop. The estimated Recovery Factor using this cutting edge technology is estimated to be 20%. The Company is attempting to assign a value for this land position. At maybe C$60-C$70 per barrel the it is obvious that the potential reserves are next to worthless as just as much money has to go into developing those reserves as they are worth when produced net of operating costs. But you hope oil prices will be higher in the future when you get around to developing such a resource. The company sees that 4 million barrels of possible (but far from proven) recoverable oil is present. What is it worth "In the ground" on a per barrel basis?

Example 2: Company B is involved with identifying a structurally trapped conventional oil pool over 4 sections of open crown lands. 3-D seismic has been run, there is an old electric well log in the pool showing a hydrocarbon column together with a cuttings log describing oil staining and bright yellow white live oil fluorescence. There is also a more recent flank well showing an oil water contact. Volumetrics from the well log data and the 3-D seismic give a potential likely volume of OOIP and the presence of several very analogous neighbouring pools under various stages of development show that a 20% recovery factor is likely typical. Volumetrics suggest an OOIP of around 20 million barrels and at a 20% RF there is 4 million barrels of recoverable oil resource. (Its not reserves mind as it is not Proven or Probable until actual oil is tested). The offset analogous oil pools have all been successfully developed by the drilling of a few vertical production wells and a couple of flank disposal wells each costing about $1 million apiece to drill and complete. What is each barrel worth in the ground here?


Both companies have identified an equal amount of estimated recoverable oil "in the ground" resources and neither of the plays have what could be called any Proven oil reserves per se.

A simple question would be: Is the estimated recoverable oil in the ground in Example 1 more or less valuable than the seemingly equivalent amount of oil in Example 2? (We shall assume that both targets are within the same geopolitical regime and royalty framework to keep things simple! ie there are no drilling incentives or royalty holidays available to the one case over the other. This is not however the practice in the real World where Royalties, subsidies and incentives are everywhere!)

If you figured out that the first Example requires a minimum of four wells per section times 10 sections = 40 wells at a total drilling and completion cost of C$120-C$160 million dollars while the second example can be fully developed (drilled and completed) for C$6 million - well done!

If you figured out that the first case requires successfully acquiring 10 sections of land while the second case requires only four - again well done.

What the heck price per barrel do you put on the (undeveloped) oil in each case? If you guessed it would be exactly the same as it doesn't matter what all those other factors are - it is after all common knowledge that undeveloped oil is worth an agreed upon fixed price regardless of all other factors - then I'm afraid that you would have guessed very wrong indeed!

Just something to bear in mind when trying to figure out just what exactly what kind of illogical non sequitur  "The Great Slithery One" is attempting to slip under the radar of the unwary mind here! Beware of questions that have very wide statistical spreads while still having a (cough) generally accepted average price LOL!

Think about it - and I know - I chose the reductio ad absurdam case here. But is shows that when asking the wrong question - there really is no simple or correct answer. And of course just throwing temper tantrums and insisting that someone answer the unanswerable question does not make it any "more better" or pertinent question!

Hey Spain 1, Holland 0 in overtime. it was a good and scrappy game and I think on balance Spain deserved the win - although both sides had some good but missed opportunities.

GS