Here's The PlayGood evening AWEIGH,
Regarding your comments on the warrants and the potential for a large "liquidity event" because of the warrants being well into the money:
A quick inquiry with Petro One will show that as of yesterday, there are 7.2 million warrants outstanding with an average exercise price of 21 cents. The website information (which is out of date) shows 11,476,067 warrants with an average exercise price of 32 cents, meaning since this information was posted on the website, about 4.25 million warrants have been exercised. Likely, these warrants were exercised during the price spikes after the initial discovery well annoucement back in July, when the company reached its 52 week high of 2.30 per share. None of the warrants were exercised by management / insiders, or we would have seen it show up on SEDI / Canadian Insider. The warrant expiry dates are as follows:
342,269 Warrants Expire 19 Nov 2012
72,000 Warrants Expire 21 Aug 2014
6,819,222 Warrants Expire 26 Jul 2015
I think you'll agree that if the warrant holders chose not to exercise during the peak share price days in the two dollar range, then they certainly aren't likely to exercise the warrants now at the current share price levels (unless forced to by margin calls, etc). So I don't think we'll be seeing a "liquidity event" any time soon unless the share price moves much higher. In fact, I think it's pretty impressive that about 2/3 of the warrants have still not been exercised, including all warrants held by management / insiders. To me, this shows that the warrant holders believe the share price will rise well above even the 2.30 range, because otherwise they would have exercised them at that time. Makes sense, right? One extra item of note I found interesting: since the 4.25 million warrants were exercised, the average exercise price of those remaining has dropped, meaning the residual value of most of the still-existing warrants is in fact higher than the value of those already exercised (so the people that didn't exercise theirs actually had more incentive to do so than the people who did exercise their warrants).
As for production rates, this is where we cover the "Where's The Play Here?" question. Your focus, in my opinion, should be more on potential rather than what we have today, keeping in mind that the market is forward looking. I would argue that based on production alone, the share price is actually undervalued, and this doesn't even take into account other assets like GSR holdings, cash, etc. Don't forget that Petro One also has a production-ready well on their J1 property, and when we talk flowrates, keep in mind that in the July NR, the remaining 5 targets were described as having as much potential or more than the discovery well. So 60 BOEPD from all 6 might be an underestimation. Ultimately, the much anticipated J5 news release will tell the true story, so I'm not sure there is much value (pardon the pun) in speculation.
Now, talking just J5, the company stated they had 12 more high potential targets left and that is just half of the J5 property (the other half hasn't even been touched yet). That's 12 vertical wells. If they go horizontal, as Poise stated, then that's even better production. And that is just targeting the Viking layer. The area of Saskatchewan where J5 is located is known for its multi-layer potential. Read the first part of the following article:
https://er.gov.sk.ca/adx/aspx/adxGetMedia.aspx?DocID=11499,11459,11458,11455,11228,3385,5460,2936,Documents&MediaID=34357&Filename=Christopher_1999_volume1_MiscRep99-4.1.pdf
The first paragraph is quite telling. "There are few regions in Saskatchewan that offer as many petroleum exploration options as the Kindersley District. It is productive in (1) natural gas from the Upper Cretaceous Judith River Formation, (2) petroleum and natural gas from the Lower Cretaceous Viking and Mannville formations, (3) petroleum from the Jura-Cretaceous Success formation, and (4) Mississippian Bakken formations. Oil shows are widespread in the Mannville, Success, Bakken and Upper Devonian Birdbear formations." So that means potential production from not just the Viking, but also the Mannville, Success, Bakken, Birdbear and Judith River formations. In fact, you can see that right next door to J5 are some Penn West horizontal wells targeting the Bakken (aerial view picture on POP website)
What does this all mean for J5? It means that 6 wells is just the start for only half the property, and this is just for the Viking formation alone. There is likely potential for other future production from different layers such as the Bakken as well. That's a LOT of potential for just one parcel of land, which represents only 1 of 18 total properties in the Petro One portfolio. Success right away with J5. Success right away with J1. Lots of potential on both. 100% success rate with drilling, so far. No debt. Low overhead due to the use of Chapmans (instead of full timers) and management not drawing a salary. A strong interest in a high potential Yukon gold explorer (GSR). THIS IS THE PLAY. RIGHT HERE. It's all about potential. This story and this company, as I have said before, are just getting started! To truly appreciate the company, I believe you need to be looking forward and thinking long term.
You may well argue that I've made a lot of assumptions here and that until we see production numbers, none of this is proven. I could make the same argument that until they fail, all of this great potential remains. It all comes down to how you look at it, because both statements would be true. However, I have done my research and I'm very encouraged by the management and technical teams the company has put together, the success the company has had already, and the impressive array of portoflios still awaiting a drill bit. To me, this means I'm willing to invest before I see actual numbers, knowing that if/when this remaining potential does get proven up and come online, I'm going to make much better returns than those that play it safer and wait for definitive results. This is a choice that is left to each individual investor. I have made my choice, and you are free to make your choice.
Thanks for the questions and for bringing up what you did AWEIGH as I do believe they offered a good opportunity for discussion. Good luck with your choices and if you do decide to hop on board with Petro One, in my opinion you have made a good choice for your portofolio.
Best regards and happy hunting.
BUMBLEBEE