This post was posted by Nathan21(nick name) else where, I thought it would be a shame that you guys missed out on his analysis as has some pretty good points
When reading the announcement one needs to have an understanding of the oil and gas industry as well as business/corporate protocols. It is also extremely important to seperate FACT from FICTION.
Now what do we know as fact?
1. They have stabilised the flow rate at 0.5 mmcfd and have declared this as COMMERCIAL. THE flow rate MAY increase after an initial period (Comment - i would state there though this flow is nominal, it is positive that the operator has managed to STABILIZE this well and undergo further testing).
2. Analysis of testing indicates that this IS CONNECTED TO A MUCH LARGER HYDROCARBON ACCUMULATION and that THIS WELL HAS ONLY PENETRATED THE EDGE OF THE LARGER ACCUMULATION (Comment - this is the fact that many have lost in translation. That is, this is a ANOTHER WHOLE NEW SYSTEM THAT THEY HAVE STUMBLED UPON AND HAS NOTHING TO DO WITH THEIR CURRENT PRIMARY TARGETS OF WHICH OIL AND GAS INDICATIONS WERE PROMINENT during drilling. This new system must be QUITE SUBSTANTIAL for the JV to temporarily forgo their current targets and try to understand).
3. More acreage obtained (Comment - it seems to me that the JV already knew about this new system when drilling and raced to acquire the new land to ESTIMATE THEIR STRUCTURE SIZE - indicated in their previous news release).
4. The reason of the JV declaring the lower zone commercial is twofold - to GENERATE EARLY CASHFLOW and TO HAVE MORE TIME TO EVALUATE ALL THE DATA FROM THIS ZONE AND OTHER ZONES HIGHER IN THE WELL BORE (Comment - business mentality kicks in and it is indeed the most prudent thing to do. Many traders and investors are crazy if they think the JV is going to forgo a possible NEW HYDROCARBON ACCUMULATION SYSTEM to test the higher zones when they can always drill another well a few feet away to access those primary target zones. This is why the JV is in the oil and gas game...the number of times that i have seen firms just STUMBLE ONTO NEW SYSTEMS and have a company maker is remarkable. Now i am not saying that they have something substantial but one must admit that the facts and their business moves indicate so. Do not be surprised if we get some form of resource delineation in the next couple of weeks that comes straight from left field).
5. The JV has now decided to build infrastructure including permanent access roads, production facilities and pipelines (Comment - it is quite apparent that the JV are gearing up for an extensive appraisal drilling program - even the most negative investor or traders is able to this clearly).
6. Once all data has been fully evaluated, JV will decide to either test the primary targets OR drill a new well ASAP (Comment - Now many feel that this will take all of two months and i must state that is quite inaccurate. The JV will be able to understand and intepret the formations from
the data and do straight risk/reward scenarios from the production performance of the deeper zone in a shorter period of time and will update their shareholders accordingly. History speaks for itself).
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Now that we have seperated the FACT from FICTION, we can start having proper arguments based on the above. From what i have noticed from my exile, the following is obvious. There are currently;
1. Day traders and investors who bought low and sold high and are thinking of getting back in soon but evaluating their positions.
2. Traders and investors that have bought high (5-7 cents) and are holding.
3. Traders and investors who had NOT done their relevant due diligence and rather depend on other posters for information regarding possible investments. As such, once announcements are released, their inabilities and emotions are brought forward in the open in crazy sells and comments.
4. New investors and traders who are hoping for the next run but have not done any DD as yet.
5. New investors and savvy traders who have done their DD and are comfortable with their probably entry positions.
6. Negative rampers looking to come in at lower prices (this is perfectly understandable).
Now there may be other categorizations but i will leave it at that. In the next few weeks, you can be certain that we will be getting information and data regarding the JV's plans and any other updates the JV feels pertinent. There is also a chance that investors and traders might be caught out with a significant announcement. This is a possibility only cause the JV has already indicated that a NEW SYSTEM has been DISCOVERED and will NEED TO BE INTERPRETED.
Many in here might call this a ramp (i.e. positive) and it does not matter to me as i have only stated my opinion based on my experiences in investing in this industry. I am in disbelief (though not surprised that positive news such as these would cause a huge downturn). In my opinion, many have lost their train of thought and have evaluated the Fausse Point project's NPV and subsequent company's share price based on the flow rate. This is crystal clear. If the flow rate had been 1.8 mmcfd, the share price would be much higher...BUT one has forgotten that this flow rate is from a NEW FIND (and a possible linkage to a HUGE HYDROCARBON SYSTEM) and not the primary targets above.
Piercement Salt Domes are prolific producers (factually proven) but need to be understood well. The JV is being prudent in trying to obtain cashflow whilst testing the formations and area.
In relation to the VILO options, it is a risk but albeit should be a calculated one. 4 months is quite a long time to wait on a possible re-rating. The JV has a new find, oil and gas indications in their primary targets, commercial flow from a new find, build a whole new infrastructure and extended their acreage to a further 30% to estimate structure sizes...can anyone else join the dots?
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I thought I may as well include my thoughts on the chart at the same time.