Sonoro Energy Ltd (SNV)

[SimplyTheFacts]

Thanks for your input MHT - eom

[MHT]

Looks like panic has set in...

I don't know why, because there is nothing new that would cause the share price to fall this low. The only thing I could fathom is that there is a misunderstanding of exactly what is going on, because the news releases have been far & few in between.


Contracts
First thing is that there are two different sets of contract awards, with only one that was holding things up:

1) Drilling Contract
2) Civil Construction Contract

The Drilling contract was already awarded several months ago; nevertheless, it was the Civil Construction contract that was holding things up. The Civil contract consists of road construction (4 KM from the highway), plus the required infrastructure.

Apparently, the Civil contract was awarded in July; however, questions/answers were going back & forth, that Sonoro realised that the company who they had awarded the contract to, didn't understand the terms. As a result, Sonoro had to re-submit the tender.

If you listen to the First Energy presentation ( http://jetslides.tv/webcasts/503 ), Richard states that all they are waiting for now, is the signature from the drilling contractor (fast forward to 8:40 of the presentation). This implies that the Civil contract has finally been settled (Although the slide in the presentation states that the Civil contract has yet to be finalised).

While they were re-tendering the Civil contract, they were negotiating further terms with the Driller. Apparently, the contract with the driller is now vertically integrated; meaning that the driller will be buying the oil from them until the Topping facility is completed. Another way to look at it, they will be paying the driller for his services with oil.

Although the terms of the Drilling contract were negotiated a long time ago, nobody was willing to finalise it until the Civil contracts had been finalised. According to the presentation, it would appear that the Civil contracts have now been finalised. As such, the driller can now sign his contract.


Construction & Drilling
According to the presentation, it states that the Civil construction can take 30-45 days. This statement is confusing, because it leads people to conclude that it will take 30-45 days before the drill rig can be moved into position.

That is not the case: The road will take one, maybe two weeks at the most. As soon as the ground is levelled, the drill rig can be moved into position. Yes, the Civil construction can take up to 45 days, but that is for the entire project - not simply the road.

Once the drilling starts, it will take ten to twelve days for the first well.


Cash Position
When the Q2 results came in, the cash position was $7.2 Million. It’s obvious that they have spent millions since the beginning of the year. However, the question that had most concerned: Can they complete the drilling program before running out of cash?

The fact that they are presently looking for a farm-in partner, scared many into believing that they don't enough cash. However by my calculation, (granted, I don’t know how much the security aspect is going to cost), they should have enough cash on hand for the 3-well program (definately enough for two wells).

The problem is what’s going to happen after that, given the fact that they want to drill a further 12 wells in 2012. I believe this to be the reason for the farm-in partner(s). If they are looking for a partner today, it will take several months before someone signs on, because that’s the time one would need to conduct proper due diligence... It will not happen next week.

Nevertheless, when Richard revealed that they were looking for a farm-in partner, it gave the impression that Sonoro wouldn’t be able to complete the present 3-well program without help. The present 3-well program will go-ahead without a partner… the partner is for next year’s program. The problem is that most didn’t understand this; hence the fall in share price.

[small_timer]

On one hand, I think that this adventure might be over (pending a last minute farm-in deal).

On the other hand, it seems to me that Sonoro's work may have some kind of residual value. They have done a lot of work, and spent a lot of money to get things this far. But - I have no idea what that residual value might be.

At 5 cents a share, it would take a bit over $5 million to buy half the available shares (100,000,000 excluding warrants). But, that much buying would get a lot of attention.

Thoughts?

[killawhale]

I agree, mgmt has let me down in terms of the ability to execute pure and simple. Not have they been late in almost everything they have set out, they have also mis-judged their resources (most importantly their cash resource) which is a huge let down to me. I agree with BWLD on Rafuse cutting back, that perhaps in unison with the lack of insider purchasing for the last three months have been the biggest negatives for me. I imagine the contracts haven't been finalized because what drilling company is going to finalize the deal with a company that has no money to pay them. At this point a farm in is our only option (a PP down here would kill the stock. The company definitely is in no position to bargin however the flip side to that argument is that at these prices SNV doesn't have to offer much to make mucho profits for whoever comes in...we all know if they are able to drill, the $$ will flow. For a company looking to gain access to the Iraqi area, SNV with their resource base and current mkt cap to me seems like a great opp and that perhaps is their biggest bargaining chip. JMO

[bwldforbucks1]

The other thing with the JV is what kind of terms they'd get with the stock at this position. They really have little to no bargaining power, so if they do come through, I wonder how bad the cut of the equity stake will be.

[bwldforbucks1]

My theory for the last few weeks was all of the delays had to do with financing. They stated in the MD&A they didn't have anywhere near the money to complete the full program. It's obviously all speculation, but Rafuse cutting back his duties was my key to unload the majority of my position to salvage something.....if they come through with a JV this stock will make millionaires out of people in down here. Just for personal reasons, I wasn't willing to go down with the ship.

All an opinion.

[small_timer]

I can't help but agree with you ... these guys have been late with everything. Perhaps that is part of the 'first-mover' advantage.

I am concerned about the money situation as well. And if its not money, I wonder if there is something else that is holding this show up. In any event, the longer the drilling gets delayed the less cash we have in the bank.

Here's hoping for a miracle.....

[SimplyTheFacts]

"Do you think there is hope for a farm-in agreement or some kind of 'white knight' that will save the day?"

I honestly have no idea, wish MHT would chime in here... These guys have been late with everything they have set out to accomplish and have been extremely bad with press releases and informing investors as to what is going on...

Sad thing is, many of us are in this stock because of the experienced, capable management... Their actions to date have been anything but that... Not bashing, just stating the facts... and upset that with all my years of experience I still got suckered in and became a bag holder... too late to sell here, IMO, might as well wait for a miracle...

My only hope is, they will be able to pull something out of the hat... Announcement of drilling contract would be good, actual drilling could save us "investors"... but do they have enough money or could they actually line up all the ducks to pull it off?... Don't know.

[jojoba]

What I really don't understand is why the drilling contract is not yet finalized and the work started by now. It is the end of September!!!

[small_timer]

I'm still riding this waterslide, but I must say, things are looking rather dismal.

I'm hoping that Sonoro has been working on a farm-in agreement for sometime and that they are going to release news soon. Having said that, it almost seems like wishful thinking.

Do you think there is hope for a farm-in agreement or some kind of 'white knight' that will save the day?

[SimplyTheFacts]

Anybody still in this? Sure looks like the company is going out of business... stock is not even capable of a dead cat bounce... anyone spoken to the company lately? MHT any opinion would be welcome at this juncture... thanks,

Simply

[jwboorma]

Yesbhe did i got the email this morning. And he confirmed quintons status. I am curious as to the reasons, dale simply said it allowed him to pursues other opportunities. He also said they will be announcing material events going forward.

[killawhale]

Dale just confirmed that it is 7%. RW just mis-spoke during the presentation....it happens.

[killawhale]

I think you make a great point regarding possible negotiations that might be preventing the insiders from buying. Within the first 2 minutes of the presentation you hear RW mention market cap several times as one of attractions here. This is essentially him saying that he thinks the stock is extremely cheap down at these levels which makes me think he would be buying if he could. Having said that, at this point it is just pure speculation. I have to agree with BWLD in that a lot of the events that have occurred over the past month or two have been very negative, especially the demotion of Rafuse which the company never addressed openly. I wish somebody at the conference would have inquired about this. I like the both of you remain a long but never have I been so nervous holding this stock which I have done so for the better part of two years. The cash situation is definitely dire, but I think the opportunity for a farm in to happen especially when you consider the limited number of companies operating there and the shear size of the license. Just some random thoughts in these dark times....

[jwboorma]

Excellent rebuttal!

I will give you rafuse, I did not see the site update and do not expect a response from dale until the morning.

I am hoping that the JV negotiations are extremely tedious and as such will not be completed in a short period of time. My other angle would be any potential suitors may wait until they have confirmed their find with successful wells.(we could play what if all day)

I would be inclined t believe the freeze on trading angle because there has been no sales and no attempts to average down by anyone who have very high asset cost bases right now.

They have missed updating the slides before, I am hoping the 7and 17 is an oversight. If it is I cow,d question their attention to detail.

All other points we are in line together. This is either gonna make me a pile of cash or I will be eating a loss. I'm not getting out now, missed that boat already.

Anyone else feel free to join in, be careful though, you may learn something :p I did ;)

[bwldforbucks1]

So the presentation says one thing and the presenter says another, I've never seen the number above 7%. I'll leave it at that.

We both obviously aren't sure on the actual rules and regulations on insider purchasing, I'll call it a push.

Rafuse had his title changed recently from Chief of Exploration to Geological Consultant, check the site. Dale confirmed.

The missed deadlines may not have been their fault, but they formulated the dates and missed them nonetheless.

I've read the report. Nobody disputes the upside.

If they've been looking for a JV since beginning of the quarter why hasn't it happened is the question? Could be explainable delays or maybe not. The problem is as of now, the company is in a terrible bargaining position and I'm not even sure how feasible a PP is if the price keeps falling and they can't do a JV. If they do, I can't wait to see the terms.

Everything taken together is grim. Still a holder but with a pared back position. Not willing to go down with the whole ship, but willing to go down with a good chunk because of managements credibility.

[jwboorma]

That's right bwldforbucks you do SEE 7%. now if you were to LISTEN to the presentation at 15:10 he CLEARLY states 17%. as for insider purchases I will be content with the explanation that insiders cannot purchase during farm in negotiations because it would violate insider trade rules because they have material knowledge. You will have to explain your comment about mr.rafuse stepping away from his responsibilities. Regarding missed timelines for the drilling...at 9:01 to 9:35 he explains the issues and I will not lay the blame at their feet. Do not mistake patience for condoning these issues, I am irritated to put it lightly. However I was in at 15 cents so I'm sitting on a small loss percentage wise.

I'm also assuming you have not read the full first energy report if you have neglected to listen to the presentation, I will provide you the link to better equip you to poke holes in my own point of view.

http://www.firstenergy.com/research/documents/Focus-C-Sonoro-2011-06-20.pdf

As I always say, if you have questions email dale, he has never let me down.

[e-mail]

As always...I welcome your rebuttal :)

[killawhale]

Thanks for the info on the new slides I was waiting for that to get cleaned up. First off, it is 7% not 17%...huge difference, the fact that they have not purchased any shares since June after purchasing shares nearly every month for the past year is also a little concerning. I am of the opinion that a PP would effect us. They would need to issue at least another 100M shares to get enough to carry them into drilling. Our last PP was a total of 80 M shares that were issued at roughly the beginning of the year. You can pull up a chart and see what has happened since then. If we were to PP I would expect the sp to fall in the mid single digits..not the end of the world and positive drilling should help us recover, but still..definitely not the way to go which fortunately management agrees.

[bwldforbucks1]

I see 7% in the latest presentation.

Also, they knew they were going to have to go this route in early summer. Why hasn't it happened? We're only left to guess....here's what we know:

-Mgmt significantly missed self imposed timelines
-Insider purchases stopped around the same time
-Very little operational progress over summer
-only new item I see is the EIA
-Weak bargaining position for a JV
-Rafuse has stepped back responsibilities

The above are facts, not opinions, and as investors is all we have to go by. There could be plausible explanations for all of them, or there might not be. From the outside looking in, it doesn't look good.

Granted all of this could change on a dime with annoucement of a farm-in. It's all a gamble at this point.

[jwboorma]

Your answers are in the presentation. Management has contacted me and informed me that the audio issue was cleaned up. Insiders control 17% of shares, PP would hurt them too much. When discussing partnerships Richard uses plural, I am a believer in unconscious cues like that.


http://jetslides.tv/lobby/503

The presentation will be available in an archived version at this link for 30 days following the live presentation.

[killawhale]

A better question to ask is where is the cash? Without that the contacts don't mean anything, and it is my guess is that is what is holding the process up. Bottom line is we have three options:

1. Get a farm-in quickly because the cash burn rate isn't slowing down

2. Do another PP (which would require more than the 80M float increase that happened awhile back)

3. Failure

[jojoba]

Where is the drilling contract?

[bwldforbucks1]

What are your thoughts on the farm in partner? Also, from talking with the company, what gave you the impression it was probable (at the time you spoke with them)?

I mean we all know the obvious target, but if not them, I would have to think it would be a major. More specifically, due to the political issues over there, I would think it would have to be one of the companies already approved by the Iraqis. See here, it's a list of the 41 "pre-approved" companies for the 4th round of bidding:

http://www.iraq-businessnews.com/2011/08/23/listing-of-firms-qualified-for-4th-licensing-round/

[small_timer]

Topping Facility

The MD&A note that $10 million is required for the next phase of capital works (i.e. civil works and 3 wells).

It seems to me that this cost estimate excludes the cost of a topping facility - is this correct?

[jwboorma]

Anything is possible. I think management are very shrewd and have a couple tricks up their sleeves. From my conversations I believe a farm in is probable, which will (in addition to the twenty million we stand to make from warrants in January) cover the costs of an EXTENSIVE drill program in the spring. This I hope will lead to project based debt financing related to the last requirement of our liscence....the topping facility. if all this comes to pass...we'd probably still make money if we showed up at 40 cents.

I expect a big jump on the announcement of a farm in partner, the actual spuding of the wells, the results and the announcement of the spring drill campaign. I can't be certain of the timing of the drill campaign though.

[jwboorma]

Anything is possible. I think management are very shrewd and have a couple tricks up their sleeves. From my conversations I believe a farm in is probable, which will (in addition to the twenty million we stand to make from warrants in January) cover the costs of an EXTENSIVE drill program in the spring. This I hope will lead to project based debt financing related to the last requirement of our liscence....the topping facility. if all this comes to pass...we'd probably still make money if we showed up at 40 cents.

I expect a big jump on the announcement of a farm in partner, the actual spuding of the wells, the results and the announcement of the spring drill campaign. I can't be certain of the timing of the drill campaign though.

[jojoba]

Jwboorma, thank you for clarification.

Jwboorma, do you see 40 cents possible by the end of 2011?

[jwboorma]

We must lease the land our access roads and bridges are on. We have a contract to explore and develop the area relating to heavy oil. But we do not "own" any of the land, and thus must "lease" the land we wish to alter.

[jojoba]

MHT and other posters, anybody knows what is this paragraph about: "Sonoro is currently awaiting a land lease agreement for the area of operations and is working with the Province to finalize this. All required documentation has been submitted and the approval is expected by as early as mid September." ?


It may be about something else, like possible light oil, because from what I remember they have all agreements with the province in place for the heavy oil.

[jojoba]

Sonoro Provides Operational Update on its North Salah ad Din Prospect in Iraq (cnw)
TSX Venture Exchange Symbol: SNV

CALGARY, Aug. 29, 2011 /CNW/ - Sonoro Energy Ltd. ("Sonoro" or "the Company") (TSX-V: SNV) is pleased to provide an operational update for its North Salah ad Din project in Salah ad Din, Iraq.
Operational Update
Drilling Rig, Services & Equipment

Sonoro has concluded tendering and selection for a drilling rig and all associated integrated services in connection with its three well drill program on Sonoro's North Salah ad Din project. The tender process contemplated that the contractor provide all services (camp, drilling fluids, bits, cementing, logging, perforating, etc) and equipment to carry out a fully integrated program to drill, complete and test the planned three wells, with the successful bid constituting a binding contract for services upon award of the tender by Sonoro.

Following a comprehensive review of the bids received and discussions with various bidders, Sonoro identified a full-service integrated drilling service provider with substantial operating experience in the region as the preferred contractor. Sonoro and the contractor have since made significant progress in refining the scope of the program and the related contractual terms and have completed a number of preparatory measures for the drill program, including early preparation of a mobile rig currently in country and ordering long-lead items. The parties contemplate executing a comprehensive drilling contract before work commences, but this step remains incomplete pending resolution of, among other things, inquiries of the contractor regarding permitting and approvals. While the timing for completion of this process cannot be confirmed, the preparation by the parties is sufficiently advanced such that the contractor could be on site and drilling approximately 60 days following a definitive decision to proceed.

Sonoro is currently awaiting a land lease agreement for the area of operations and is working with the Province to finalize this. All required documentation has been submitted and the approval is expected by as early as mid September.


Civil Construction

The Company tendered and received bids for the civil works program from various local civil construction firms located in the Salah ad Din Province in July, but, as further clarifications were subsequently required, the Company re-opened the tender process in early August. The Company has now received and reviewed revised bids. The Company anticipates a 4-6 week period of construction once the bid is awarded.
Environmental Impact Assessment and Site Survey
A site survey was carried out in July to define the optimal surface drilling locations and access road to the locations. Based on this site survey, the Company has filed an application for the land lease agreements with the Salah ad Din Provincial Government.

An Environmental Impact Assessment study has also been awarded to a local Iraqi company. This study is currently in progress on the drilling locations and vicinity.
Richard Wadsworth, President and CEO said "Over the past several months the Company has made significant progress in its planning as well as finalizing the drilling and civil works contracts. We look forward to carrying out the drilling program to appraise the North Salah ad Din prospect in the near future."

Financial Statements and MD&A
Consolidated financial statements for the period ended June 30, 2011, together with Management's Discussion and Analysis ("MD&A") are now available on the Company's website at www.sonoroenergy.com and will be available on SEDAR at www.sedar.com.

Forward Looking Information
This press release contains forward looking information, including, but not limited to, planned exploration at Sonoro's Salah ad Din exploration project, the timing and results of the three well drill program on the property as well as the potential for production or reserves being derived from the prospect following completion of the drill program. The forward looking information is based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to, risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of resource estimates; the uncertainty associated with geological interpretations; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environmental risks), political and security risk in Iraq, the risk of commodity price and foreign exchange rate fluctuations, risks associated with the implementation of new technology, risks associated with obtaining, maintaining and the timing of receipt of regulatory approvals, permits, and licenses, uncertainties relating to access to capital markets and the risk of volatile global economic conditions. Due to the risks, uncertainties and assumptions inherent in forward looking information, prospective investors in the Company's securities should not place undue reliance on forward looking information. Forward looking information contained in this press release is made as of the date hereof and are subject to change. The Company assumes no obligation to revise or update forward looking information to reflect new circumstances, except as required by law.

About Sonoro
Sonoro is an international oil exploration and development company. Our current focus is asphalt (heavy oil) resource exploration and development in Iraq. The Company has commenced with the evaluation of resources within Salah ad Din Province and has plans for an initial three well appraisal drilling program. The Company is also identifying additional exploration prospects across its license for future development opportunities.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For further information:
RICHARD WADSWORTH
PRESIDENT & CEO
+1 403.262.3252
[e-mail]
www.sonoroenergy.com

[bwldforbucks1]

I hear you, but he's now hinting at a much more definitive time frame.....even though we are technically a penny stock, we have professionals running this company and even though their incentivized to spin everything as half full, I'd like to think their word is worth something, we shall soon find out.....

[jojoba]

I heard the same old disk from Dale we are hearing from the last 3 months, he cannot tell anything and contract signing is very close.

[killawhale]

I know myself and others have called or contacted Dale several times over the past week or two...He has confirmed that they are very close to finalizing drilling contracts...still no PR. The further this thing gets dragged out the further my confidence falls. My gut says Monday morning we will have our PR. I will be disappointed if we get a MD&A and still no drilling contract PR

[SimplyTheFacts]

It may be a good idea for all of us to call them up,ask questions, and show our displeasure with the lack of communication...

[jojoba]

Management should tell us what is going on with Iraq project.

New 52 weeks low today is not a pretty sight. I will not buy more before seeing an update.

[killawhale]

I meant Q4 not Q3

[killawhale]

Haven't given up just worried. End of September is completely out of the question in my opinion. I believe it will be more like Q3, a few month delay will not be enough for me to sell, but if something larger is in question (license or something of that nature) then the game changes for me.

[jojoba]

There is still time until the end of September. Don't give up now when they are so close to drilling.

[killawhale]

If it were just insider buying I wouldn't think much of it. But that coupled with the two month delay in very important operational procedures does worry me. I don't think you can discount the fact that this was a huge operational test for the company/mgmt and they failed. I am not trying to be too doom and gloom but my only hope is that this is just taking longer due to smaller tedious issues rather than something larger with the license or something like that.

[jojoba]

I hope so too. I am not worried about the insiders buying, they bought a lot in the 20 and 30 cents range.


MHT used to give very accurate target prices. I would love to hear his new targets for SNV share price.

[killawhale]

It usually is a few days or weeks...not several months ...but hey I hope you are right

[jojoba]

Isn't that called blackout period when insiders cannot buy or sell?

They may not be allowed to buy before a big news release that can make the share price to jump 300% - 400% overnight. Just a thought.

[killawhale]

I think for me, it is extremely hard to envision a early Fall drilling date. When I last spoke with IR, they said that they estimated it would take 60 days after finalizing contracts to commence drilling, which pretty much puts September out of the picture. I will note that the 60 day estimate itself could be a bit ambitious as we have seen how aggressive they have made their timelines and the result of that. Having said that, I don't expect a 2-3 month delay will have much of an effect in the scheme of things as long as there is not something bigger that is in question here. MHT, I wanted to hear you thoughts on the lack on insider purchasing. For the last year or so we have seen pretty consistent monthly insider purchases until the month of July and now August. I may be acting a bit superstitious but the last month I believe that there were no insider purchases was Feb 2011-the same time that they were expecting to release JV results in Albania. We all know how that story went. I think it would show a lot of confidence to shareholders here if we were to see some insiders start buying again as we are currently flying in the dark regarding drilling. What are your thoughts on this issue?

[MHT]

As far as I know, everything is still on schedule.

The civil work will begin after Labour Day and take a couple of weeks. The drilling rigs will then be transported in and drilling will take another couple weeks. End of September is still the target date.

[jojoba]

MHT, do you have any knowledge regarding the drilling contract they try to close for the last 2 months?

Do you think end of September drilling plan is still on?

[small_timer]

New Website and Presentation



For what its worth, I just noticed that the company website has been updated and there is also a new investor presentation.

The presentation doesn't contain much in the way of new info. I found the last few slides rather interesting though.

cheers

[jwboorma]

Hey bwldforbucks1

I have also been doing some research regarding the pipelines and ha e come up with several thoughts. 1) one of our directors (owner of the bin jallah group) is in the process of constructing a seamless pipe factory specifically for pipeline construction. This could work in our favour in the sense that we would have a contact with the people actually building the pipelines, and perhaps leverage that relationship to gain access to said pipelines. Furthermore, I encourage you to check out their website where it lists their resources....they have several asphalt plants and I am assuming access to to trucks for shipping that may be able to purchase what these local entrepreneurs cannot (assuming there is any surplus) that said, the idea proposed by MHT is a novel one to me that had not crossed my mind, the only thing I would be concerned about is how much the discount must be to make it economical for these guys to ship it to the existing refineries. 2) if you would like a good map of the existing and proposed pipelines there is a great diagram in the most recent westernzagros presentation (they operate in kurdistan - pg 7). I agree the cost recovery factor is huge and the province has been extremely generous in this regard. One question I would openly ask for everyone to comment on is "does production from one or all wells constitute commercialization and require berkely to ante up their 30 percent that sonoro has been carrying them thus far or is the topping facility the development that triggers this - either way I will be asking dale the next time we speak.

JV wise, I am hoping that they start optioning off the "blue fairway" which is is in the top left area of the map and seems to me to have the least ammount of sesmic done. This would be a good opportunity to build upside, expplore more areas that we would typically not have the resources for (and potentially develop) and put us in a position to raise funds in a non-dilutive fashion. ( I believe this will be the trend going forward because of the large equity positions held by the management of this company) Furthermore, this will allow us to concentrate on the Jeribe formation and that middle fairway that seems to be completely seismic mapped. I would also submit to the board for evaluation the speculation that once Sonoro really gets rolling it will have the cash, contacts, and infrastructure in place to make a very compelling argument that they will be able to capitalize and exercise their preferential rights to develop the lighter oil I PERSONALLY believe is present at larger depths.

I agree with everyone regarding the civil contracts and their current status, but I am hoping our contacts with the bin jallah group will help us out there, the only question there is will they try to build goodwill by hiring smaller local construction companies? In addition, I am hoping that given the terrain it would not be difficult to build a 4km dirt road to the sites (excuse my ignorance if I am incorrect). Lastly, I am kinda hoping that they will have settled the simple civil contracts earlier in the month and just did not announce it because they were waiting to do it all together with the drilling contracts ( my rationale here is that the resource upgrade was dated July 1 and they sat on it for 25 days...which actually kinda pissed me off to be honest.

In any case these are my opinions and my hopeful speculation. I look forward to the fall campaign and everyone else's thoughts.

jw

[bwldforbucks1]

Thanks for your response. Here's a few general thoughts / questions. Feel free to respond to any that you find interesting / provocative....

Do you have any sense what the break point might be to shift transport means from trucks to pipelines? I've begun looking into this now that we have better ideas of production / operating revenues and costs.....it seems a given, assuming security stays relatively stable that there will be significant pipeline construction. The question would be obtaining access....this is also something I'm digging deeper on......

In reference to the "local entrepreneurs"....my initial reaction to this is counterparty risk....this doesn't sound like there would be any sovereign guarantees....

I like this low cost strategy of just getting the oil out of the ground and cash flows coming in while they continue exploration / upgrading the quality of the reserves. That was what I was missing....the reserve based financing. What's interesting to me from a finance perspective is the effect of the 80% cost recovery aspect of the license on financing strategy, this allows for a very lucrative cash flow stream in the early stages, perhaps facilitating a lot more leverage than a traditional oil deal....

Finally....what are your thoughts on entering into a JV not just for the topping facility, but also for some of the project.....From all the research I've done on Iraqi oil resources, and tell me if you disagree, is that the prospective heavy oil resource in the country could be north of 50BN barrels....the obvious concern to any further slicing up of the project is further dilution of equity economics....but given our prospective resource size (not including any future licenses / projects), I believe it will be so significant that the financial resources / expertise to scale up production and share the risk burden would be worth it....almost shifting to a royalty type of company.....Obviously all of this is speculation, but its still fun nonetheless.....

[killawhale]

Thank you for the response, I share you concern regarding the civil aspect of the contracts. I have no idea how long that process would take, however I am hoping that the major highway that runs pretty much right through the SAD province will make this less of a hassle. It is also comforting to know that Sir Bin Jarallah certainly has the resources and know-how for the roads and other civil infrastructure issues, whether or not this is completed on time is a whole other issue.

[MHT]

For Killawhale...


MHT, how concerned are you that we are still waiting on the drilling contracts? I realized this is not a huge concern (yet), but it does make me a little uneasy that they will be able to deliver on time and commence drilling in late September. Do you think this delay will have any effect on the timing of the drilling?


I'm not too concerned with the awarding of the drilling contracts, since they have ample time to award these before September. However, I am concerned with the delay of the civil contracts. These are the contracts that will build the infracture leading to and at the drilling site (e.g. road leading from the highway to the drilling site).

With August being Ramadan, I have no clue as to how long it will take to build the required infrastructure before drilling can commence.