So this is your first foray into O & G? That's exciting to me for there is so much about energy trading if only for the incredible possibilities that might turn up at any time.
Let's tackle something you bring up as it relates directly to not only this particular company but actually any company drilling for hydrocarbons. The subject is the three P's:
In oilfield parlance we assign prospectivity values to three stages of presumed value. Thus we recognize each by awarding a name or title representing what one could logically expect to uncover, assuming drilling in that particular area or zone.
When assigning such names or identifiers, we make use of seismic for starters. Previous drilling in that specific area or adjacent areas can be extremely illuminating. Core samples tell us a great deal about soil conditions as well as the presence of material suggestive of the presence of hydrocarbons, be they in place now or formerly so as in the case of oil migration. Much of this will become clearer as we move forward, below.
The Three P's:
POSSIBLE
This is how we may view an area thought to hold oil, gas or both, based on a number of possibilities but lacking concrete evidence. This is where the dreamers among us find ourselves trapped in often pie-eyed wishful thinking. I, personally, refuse to even consider buying shares in a company whose leased lands have been assigned the single P value. I'm too old for that level of risk as such hydrocarbon systems will often take many years before there can be a meaningful start towards development. Add in the three to five years typical to bring found oil to market and even then---where's the infrastructure to support it?---and you get the idea. Worst of all is the lack of proof supporting even the mere possibility of oil in place.
PROBABLE
Here is where things can get dicey. Say you've got a lease with a few working wells. You pick up an adjoining lease, assuming this lease will compare favorably with the other one. But it may not be the case. A hydrocarbon basin may hold millions of barrels of oil but knowing where to sink the drill bit is crucial. There are up-dip situations indicating there was oil at some point but if it's "migrated" because there were no "seals" containing dome-like structures to prevent the outflow, then you're out of luck and also oil.
Seismic will usually help define the level of probability of there being discoverable oil in place (OIP) but without 3-D seismic and extensive work performed by very highly trained petroleum engineers, all bets are off. And even if not, there's the question of prospectivity as in:
Assuming there's oil, will it be enough to assure us of the commercial viability BEFORE drilling? After all, we're talking about million of dollars here, whether onshore or offshore. Still, many companies will take the gamble in the belief they are more talented, luckier or patient.
PROVED
Proved reserves are held to be the most desirable yet I know from firsthand experience that even these reserves can fall through the cracks. Seismic, both 2-D and 3-D, can illustrate where oil should be. 2-D refers to two dimensions as in length and width. 3-D provides that most desirable third dimension---depth.
Again, only the drill bit will truly prove the presence of what we'reseeking. Core samples will bring up mud from well beneath the earth's surface and this will feel oily, smell oily and probably taste about as bad as last week's fish fry. But even the sharpest geophysicists will happen upon subtle differences contrasting from their prior experiences. As a result, they may fail to accurately predict the future. I've never met a dumb geophysicist, rest assured. But life is full of anomalies. When we're focused on substance usable only after lifting it out of the ground, we're dealing with nature, birthing place of the very seeds of nature that spawned us and all that comes of us.
The study of oil in place can be incredibly tantalizing.
For those who care to understand more about this, let me refer you to Robert Bearnth. Google should have some good stuff. Also, Neil Moore. /six years ago, Bob was honored as the world's leading geophysicist, credited with no less than six major discoveries. Neil, his partner and long time friend, is the electrical engineer who first figured out how to conduct seismic research from the back end of a boat, trolling through waters with "geophones" attached to an array of wire lines. He used as many as twelve of these instruments, recording responses electronically, arising from exploding tiny charges well beneath the sea. By interpreting differences in pitch and times of decay, it was possible to determine the nature of and viscosity of material thought to be oil.
My really great fortune was to have had these two giants as my personal friends and teachers. They'd been reading my energy-related articles in blogs for years and hired me to run their company's investor relations department. I've never known better, more upstanding, outstanding and honest men than these two, now departed.
This is a lot to digest, I know. And it will likely lead to many questions. That's fine with me so long as it helps someone here to possibly find an interesting and profitable place on which to hang a hat. I know I have been extremely fortunate.
Final point: Where does this attach meaningfully to Caza Oil?
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