Welcome Ivan Boesky, since you were kind enough to share, let me too share with you and the board a recent 09/08/08 communicate/e-mail that I had with KA.
This is a long read but it is a well worth read.
At first I was not going to post, my normal practice is NOT TO SHARE E-MAILS FROM KA, but KA has provided his blessings and due to the tone over the recent couple of months along with the current trading pattern on Hemi; I believe that this should be shared and this will shed some additional light to the position of Hemi Management.
Oh Yes there will be those who will jump all over this type of delivery, but IMO it does provide some good insight to thought.
Kels
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From: Keith Anderson <hemienergy@sbcglobal.net>
To: Kelseyf
Sent: Sunday, September 7, 2008 8:31:03 AM
Subject: Answers?
Kels, I am going to throw the cards on the table, feel free to post this if you like... its your call. I have used excerpts from your email in order to answer your questions, which I am not sure I have done clear enough or not... if not feel free to say so.
Your questions are in bold and the answers are in standard fonts
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Many are concerned about the PPS due to the recent 2008 Pr's that have been provided by Hemi, giving very good information, indications, forward statements and actions by Hemi and yet the price (PPS) continues to decline. As I have mention to you earlier, IMO many believe this is due to lack of execution and/or follow up providing specifics that an investor can bit into.
You know the issues that are being discussed and circulated on the Internet blogs and I am not going to go into that area. But as an investor the only measurement that we have (investor) is the ROI. Understanding that any investment can and does take time to develop but when a stock price pattern starts to develop and continue over time, then an investors red flag goes up and in the case of Hemi this is what is developing; a pattern or a PPS trend that is not good.
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Kels the only why I know to make a point regarding this "Internet blogging/red flag subject is this way and the stunning ignorance of some people with a key board. There is an agenda in play some malicious, some is out of frustration and some is there playing on baseless fear, because they cannot get to us any other way than through this. So let me move along on this point.
Check out these two recent Pr's from two of our competitors Quest (QELP) (qrcp) and petrol oil and gas (PIOG)
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Quest Announces Resignation of Jerry Cash
David Lawler Named President
Boards Form Joint Special Committee to Conduct Investigation
OKLAHOMA CITY — August 25, 2008
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and
This SEC filing
Entry into a Material Definitive Agreement, Financial Statements and Exhibit
Item 1.01 Entry into a Material Definitive Agreement
On April 30, 2008, Petrol Oil and Gas, Inc., Neodesha Pipeline, Inc. and Coal Creek Pipeline, Inc. (collective)
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Go see what has been said about this on IHUB or any other stock site, it will surprise you...
Compare this to all that has been said and speculated about with us. We aren't moving fast enough, things are getting done in a timely manner, we are going bankrupt... total nonsense. None of this could be further from the truth. Now compare what has happened to quest and petrol its Internet postings and speculations compared to ours. As it seems all our "problems" are emanating from the Internet. These companies were SEC reporting, I am quiet sure the Internet bloggers and posters were not coddled by these CEO's and others with emails and things of that nature, they did not release as many press releases and they drilled hundreds if not thousands more wells than us... for the most part dry holes or minimal production per bore hole and tried to make it up on a numbers game. Now mind you we do not have the issues of above... are you starting to see where I am going with this by doing comparisons? Notice their stock price after all this compared to ours?
We are still debt free... you cannot go bankrupt if you have no debt. That is why we have aggressively avoided debt. The strange thing is there is millions and millions of dollars of debt available to these type of ventures. Is any one noting the irony in this?
Things not getting done fast enough up there... We are not drilling holes for the sake of drilling holes and we are not hanging paper via the NOI's just to please some ignorant Internet people. What we have here is we think we have hit major if not prolific natural gas discovery zone... it is too soon to tell the size of it, but I think it could be as large as 2 to 5,000 acres and we are looking at expanding on this find at the Collins and Bennett leases. (now mind you we have done this in drilling less than 10 wells, compared to the other 2 above mentioned companies that have drilled 100's if not 1000's of wells. Does anyone think this happened accidentally? Or was it we did research took our time and nailed it, in less than 10 wells.
Ok so everyone thinks we are twaddling around (not getting things done) Gas is different from oil it needs infrastructure (pipelines) to get it to market. A pipeline/gathering system can be an expensive undertaking from the time it leaves the well head to the time it hits the sales meter, more times than not the pipe liners determine the purchase price and terms, not the free market. So we are looking at other ways to monetize that gas. What will pay us the most profit. Either way it only makes sense that we find out if there is enough gas there (through additional exploration/drilling) to justify the costs and expense of this pipeline/gathering system. If not there are other alternatives. Including other discovery zones... Something that most are not aware of its we literally dealt with potential blow out condition for several days on the Collins well and we were able to control it.
Also if we do put this Collins field into gas production, we will drill additional wells and start bringing the CBM gas on line to supplement and defray the costs of building a pipeline/gathering system.
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Many understand the Hemi business plan and model and many understand the going forward opportunity that potentially lies ahead. But the steps to get there, prior to the final execution of the Hemi business strategy also needs close attention.
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Ok while we are on that subject, its seems some of the Internet people have tried to hijack our business plan, or twist it to something they know nothing about and I am not going to compromise with this nor alter the business plan.
From day one we have said we are drilling to prove up those CBM reserves and using the oil production to pay the bills and push forward development. People have lost site of the objective we have stated from day one. The oil production figures are basically meaningless in the big scheme of things, because you can read any acquisition being made in the oil and gas industry and most are acquisition of PROVED reserves. To which ours happen to be primarily CBM gas. I have said all along I would like for the company to be bought out by 2010... the existing wells will probably have the oil production zones plugged back and converted to CBM gas wells. This is one reason we have drilled the wells and paid more, so that this option will be painless to a purchasor.
Nothing has changed there and each drill proves up or expands our proved CBM reserves along with the oil reserves. Reserves are everything in this business, hence the term where petro dollars come from and that will be what is sold in any future buyout not production. All you have to do is read the news and SEC filings of acquisition disclosures that the large gas producers have made. I am going to stay on this subject for a minute, if we do build a pipeline and start to sell gas, this is a very desirable thing in the eyes of a potential purchasor, because there are few in the area allowing gas to be transported to market.
In 2005 when we acquired some of these leases, we learned to stimulate the oil zones and prove up the CBM zones would be much to big of an undertaking. We are talking $100,000,000 or more to do both. To prove up the and stimulate the oil reserves and to also prove up and produce the CBM (they cannot be co-mingled each needs its on borehole and specialized equipment).
We also made the decision to utilize all the old wells as much as possible (if economical) to produce the oil to cover operational expense and to keep us out of the developmental funds. Many of the old wells were damaged (some terminal) in last years flood it changed the economics of keeping them online. I realize any thing can be made to work if you spend enough money on it... but will you see a return? That is the question we have had to ask ourselves since August 2007. I am digressing, but IN ADDITION to the CBM production, the option for a future purchasor to begin re-developemental drilling, waterfloods, polymer floods, huff and puffs are all very real options with the oil reserves along with the CBM developement.... doing both at the same time will easily go over $100,000,000 and the payback to do so is exceptional to oil and gas industry standards.
One reason I am using those 2 PR's as an example, is to show large amounts of money is available to the area (read their SEC filings if you dont believe me) Debt will probably be the vehicle used for a purchasor to buy us out... and why we are building this along industry standards not pink sheet standards. Industry producers and financiers will scrutinze every nut and bolt, before they make a decision. Much of the "lack of progress" is this unseen aspect of compiling that information.
This in itself shows the ignorance of what many people are saying. I dont know if it is intentional mis-information or not. We have not liquidated or liquidated a position or a lease... yet. Because there were some terms that was not in our best interest. This could be worked out maybe not. I don't know, I have made our position clear and oddly enough at the last minute the terms got changed... with the attitude we as a company HAD TO DO THE DEAL.... I wonder where they got that mis-information from from? They had a wake up call and found we will not do a deal for the sake of doing a deal. We have been in talks with the Sabine leases... but once again if the terms offered have not been favorable...
Why should we sell these if they cannot meet our terms? We are the ones with the options, we are the ones in the position of strength... we could do Joint Ventures, Partnerships, Straight sale of the lease, Royalty sale and numerous other things with these leases. Things the "internet guru's" know little to nothing about.
The same goes with Wilshire and some others we have talked with, if the terms are not favorable... then we are not going to do a deal for the sake of doing it.
Kels if you decide to post this publicly... then I am going to end it with
We have had several acts of sabotage this year... nothing came of it because we have excellent field crews, they caught it before anything came of it. I have been curious about where all this disinformation, negativity has been coming from on the Internet.
We have found the source, so I am sure this statement will reach the eyes it needs to. To our competitor and source of this disinformation and misinformation, you have no idea what we know, what we have recorded or the evidence compiled. The locals do not want to deal with you, no ones fault but your own, you have created an enemies where you did not need to and now you find yourself shut out. If you or your people are caught on our lease we will prosecute to the fullest extent of the law. We will make sure the public knows this as does the other authorities that govern the oil fields.
To your "broker" in Kansas City... yeah we know about him too. Finra and the SEC takes stock manipulation very seriously, you never know when or what they are looking at.
Keith A.
