Intelligence Analysis (my thoughts)
My take on Hemi drilling two relatively deep formation wells is that they wanted to confirm, log and mathematically estimate potential production available from the suspected target pay zones underlying and surrounding these two wells. I wouldn't be surprised or disappointed if they keep at least some of their findings confidential for now...(i.e. a surprise to be revealed in dramatic, consistent, and enviable production numbers by future wells)
My opinion is that oil production is the "low hanging fruit" right now, even though the natural gas (NG) and coal based methane (CBM) gas may hold the keys to a dramatic increase in the estimated worth of Hemi's Kansas reserves. Think in terms of BIG numbers when you imagine the potential impact of proving up NG reserves in Woodson County.
This does not mean that we have to wait a long time for our company to become fully valued. Even stranded gas can be proved up, and capped off resulting in an upgrade Hemi's reserves from probable to proven, without taking it to market. This would represent a great exchange for the cost of a few wells.
Lack of gas line access and other infrastructure, noncompetitive local buyer/wellhead pricing and bureaucratic red tape must be overcome to mitigate the issues and justify wide scale production. These are certainly not insurmountable issues, but they will take a little time and money to resolve. (Wilshire Capital Part Deaux??)
In the meantime, there's plenty of proven oil to be produced in some very inexpensive wells that can be completed, stimulated and optimized using Craig's techniques. Oil well production can provide both cash flow and bottom line growth. (Disclaimer: Common sense only, based on what I know about drilling/completing costs versus Hemi's ability to coax oil out of the ground. I'm not an accountant so I'm winging it a little when i talk about cash flow and bottom line.)
Additionally, a cash infusion, under terms described in general terms for the Wilshire Capital deal will be like pouring raw fuel into the afterburner of a jet engine...and give Hemi Energy (company value, production operations and share price) one heck of an accelerated ride! Ever seen the Blue Angels or the Thunderbirds pull up into a vertical climb after kicking in the ABs?? That's the kind of ride I'm talking about.
The natural gas/CBM reserves in Woodson County are very important, but actual production can probably wait until the political, logistical and competitive elements are in place. Meanwhile, our gas reserves, once proved up, remain safely underground, under the control of multi-year Hemi Energy leases...and like a fine wine, increase in value with a little age.
Just IMO...
xtrapink
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(long, strong and very pink)
