Monday, November 14, 2016 1:42:32 PM
Wondering if you got a chance to see what I wrote on the other site last July? I thought it might be useful to recap. There is a lot that goes into slapping the label "dry hole" on a prospect and as you can appreciate, to a certain extent this involves a detailed economic assessment - something predicated upon current and anticipated market pricing for the commodity, as well as cost to produce, ability to get it out of the ground and to market cost effectively, etc. Heck, if there is oil in the ground, just changing one factor such as the price of a barrel of oil can fetch on the market can alter that assessment (and remember we have hit a high, then tumbled to a low and are slowly moving higher in spite of a less than robust economic recovery[will that change under Trump?]).
Here is the excerpt I mentioned from July where there was a lot of back and forth speculation among board members as to what constituted a dry hole and whether we had enough information to make that call:
"I am not saying that your interpretation is incorrect, but in any event I would suggest that absent any real confirmation of a lot of critical information, it is difficult to make good determinations and in turn rational decisions.
Consider if you will, the definition of the term "dry hole" from the Schlumberger oilfield glossary (www.glossary.oilfield.slb.com/Terms/d/dry_hole.aspx)
dry hole
English | Español
1. n. [Drilling]
A wellbore that has not encountered hydrocarbons in economically producible quantities. Most wells contain salt water in some zones. In addition, the wellbore usually encounters small amounts of crude oil and natural gas. Whether the well is a "duster" depends on many factors of the economic equation, including proximity to transport and processing infrastructures, local market conditions, expected completion costs, tax and investment recovery conditions of the jurisdiction and projected oil and gas prices during the productive life of the well.
See: crude oil, duster, hydrocarbon, natural gas
We are still just working with innuendo and rumor, we have not been briefed on the outcome of the drilling at all. The fact is that we really don't know enough information to make a thorough assessment of all these factors (and this is key with respect to what is noted in the definition above) and based on what information we currently have - none of us seem to be in a position to accurately assess the outcome as to whether there were hydrocarbons encountered in economically producible quantities, nor whether logging information while drilling yields sufficient information to entice CEPSA to continue their exploration per the agreement. I think everyone agrees that our management team owes us a PR with some useful information so the shareholders are enlightened on information that is obviously material."
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