RE:RE:bought another 20k shares todayI tend to think that Original Oil in Place estimates are rather useless... except for spiking the interest
of daytraders who lack any understanding in the industry itself.
Using Alkhor's 400mm bbls recoverable over 100 years would require an average of about
11k bopd for each day over those years. This tells you almost definately that the OIP numbers
are overly optimistic.
They paid $54 million for the business. They borrowed $45 million... capex over the last year of around $20 million. Total sales volume increased by just under 15% year over year. Current production based on their news release, is around 1150 bopd. So currently, this has been a losing proposition. Any chance of profit is a long ways off, aside from their propane swaps.
Not many investors are willing to wait 100 years. It would be much more plausible if they could recover 50 million bbls over 10 years, however even that would require an average of about 13.5k bopd.
The facts are that the discovery well is producing 100 to 120 bopd from the Dakota sand. Two other layers show oil but they can't produce because of damage while cementing the perfs. I don't see
that as an engineering firms' delight when estimating reserves. The majority being contingent on many factors... geological, costs over time.