GulfSlope Energy Inc (GSPE)

[Ed Ajootian]

Hello GSPE fans, I thought you might appreciate the post I just did on GSPE on the Energy Investing board at the InvestorVillage. Would appreciate any comments/corrections:

Gulfslope Energy (GSPE) -- Massive Upside in GOM Subsalt (Miocene) Plays

This company is a throwback to the days gone by -- it is a penny stock that is shooting for the moon by generating prospects with massive upside and promoting them to larger companies.

The company is run by John Seitz, of Anadarko fame, who, apparently getting bored in retirement, put together a superstar team of GOM geologists and other geo guys several years ago with the idea of applying current seismic analysis techniques to find subsalt plays in the very southern edge of the outer continental shelf of the GOM. Starting in the 90's, companies started finding subsalt plays in the deepwater, but not much work had been done to find these in the shallower water as far as I understand.

Gulfslope has partnered with Delek Group, the Israeli E&P company that found those huge gas fields offshore Israel, to drill up to 9 of the prospects that they have identified. For the first 2 prospects, GSPE is getting $1.1M per prospect when they get the permit, and then GSPE pays just 8% of the drilling costs of the exploratory well, and retains a 20% working interest in the project.

The first well is being drilled as we speak, called the Canoe Prospect, and should be pretty close to hitting total depth. This first well is actually not a subsalt test, but a shallow 6,000 ft. target that they basically found by accident.

The real upside to GSPE is the second well, which is going to be drilled immediately after this first well. This deep Miocene target, called the Tau Prospect, is thought to contain as much as 300 million BOE (75% oil), which at current oil prices would work out to a PV10 value net to GSPE of $672M. Not too shabby considering GSPE's current market cap is a mere $82M, plus these are only the first 2 of 9 identified and leased prospects.

Looking at the upside another way, GSPE's share of the costs of drilling the Tau well are expected to be $3.1M, yet its share of the PV10 value, if its estimates of both potential reserves and drilling costs are accurate, would be about 217 times its risk capital for this project.

The company is at Enercom and is scheduled to present after market close tomorrow. There is also a chance that they will have finished drilling and logging the Canoe well tomorrow, since they spudded that well about 2 weeks ago and it is only 6,000 ft. deep.

The stock has taken a big hit over the last month, due to some deeply in-the-money convertible notes getting converted, but with the stock price popping back up by 9% in today's trading, it seems that most if not all of this cheap stock has been blown out at this point.

This first prospect they are drilling now is not a barnburner, it is projected to contain 18 mmboe and GSPE's share of the PV10 value would be $33M. But a discovery would have a big impact to GSPE's stock price since they would then have an asset that they could either sell or borrow against, to fund their share of future drilling with Delek.

I believe this stock has a legitimate shot at being a 10-bagger in a year. It is obviously not something to bet the ranch on, but I believe it deserves your review for potential inclusion in your portfolio, to spice things up a bit.

RiskyBusiness, I know you like these sorts of high-potential plays, and I respect your thoughts, so if you look at it I would appreciate your thoughts. Norm, you are involved in GOM offshore exploration for a living, so I would appreciate your thoughts too. Petroeng, you are at Enercom so if you end up watching GSPE's presentation tomorrow I would appreciate your thoughts also.

The company's most recent presentation (from May) is at https://content.equisolve.net/_e13fb0c14a525f7dadc1b73b45d67d5c/gulfslope/db/184/952/pdf/GSPE+-+LA+Energy+Conference+-+May+30+2018_Final.pdf

See particularly slides #7 & 8.

Hopefully they get the one they are doing for Enercom up on the web site shortly.