RE:August
I think that it's starting to sink in that many things could happen that would drive up the well cost by tens of millions of dollars like lost circulation, stuck BHA (bottom hole assembly) that would require a very expensive side track around it, high pressure which caused the cessation of drilling on Jaguar etc. Exxon's operating principle, when I worked with them deep salt offshore Brazil was "we'd rather be looking at it than looking for it" referring to supply boats loaded with all continguency materials that might be required in any given situation if things went wrong. The guys running the show are the cream of the crop. But that's precisely the point. They know so much because they have experienced and handled all things that can go wrong because it happens a lot. Anyway I'm still bullish on this stock because of the people running the show but anybody not expecting bumps in the road is not being realistic. I think that investors are now realizing that this is no "slam dunk" so they are becoming more cautious. Once they run and test the stack and start drilling ahead I expect a bump up in price. Offshore Brazil we were down for five days because of stack problems. Then as they drill ahead progressively avoiding pit falls, handling the bumps and hitting their targets the comfort level will increase. Note that I worked offshore both Suriname and Guyana and both are the most challenging wells I have ever experienced. Shell first drilled offshore Guyana in 1977 if memory serves. They had a hell of a time. Got a zone where the formation is so weak mechanically that if you need to increase mud weight to hold back formation pressure, the increased hydrostatic pressure from the increased mud weight fractures the formation and you lose your mud to the formation which of course reduces the hydrostatic pressure holding back the formation pressure so you end up with the hole filled with high pressure formation fluids all the way up to the stack with no way to kill the well. Everybody learned a lot from the Shell experience because now well designs put that zone behind a liner isolating it. The guys who designed this well all have tons of experience in the area. So I'm not worried at all about well design or operations. I think that once the investment community gets comfortable with them the share price will reflect that as well.