RE: RE: News Release Expected Tomorrow
I, like you have been investing in oil a long time and the one thing that must be foremost on an invester mind is the risk. The industry standard for "wildcats" is 10%. Granted this formation has proven to be very prolific; but keep in mind the nearest well is 25-30km away. and this is the first well exploring the formation in this land assemblage and the structure could very easily show, "non-commercial quantities of hydrocarbons".
A drilling manager friend, whom has drilling experience all over the world including the MIddle East informs me that in today's sophistication in controlling pressures and caution as to not damage the formation; there may not even be oil traces in the drilling mud. That would account as to why the drilling crew who probably in the past saw the traces in the mud; called their broker all excited to buy; and that started the pre-announcement flurry.
There are things that can be done to help things a bit. A) this formation has an 85% success ratio; B) It is a good exploration team with experience in this part of the world, and C) the team and the Company is committed and the employees are invested in the Company.
The riisk was 10% when they started drilling. I'd say this announcement brings them to35-49%. The testing is important and must be regarded with some caution. Because it brings to mind a well that initially produced 24,000 bbls fizzled out after 6-7 months in production. This was a well on the West Coast of Africa a few years ago. There is nothing wrong with buying champagne as long as we wait until the announcement, to crack it open.
But, the first hurle has been crossed, and I would cautiously saw it is looking mighty fine so far.