Crimson Exploration Inc. (CXPO)

[Bobwins]

I was disappointed in the declining production numbers. The forecast wasn't that positive either. 45 to 50mmcfe/d is a wide range and leaves the possibility that prodcution will continue to decline.

The Madisonville-Rodessa well problems are big because that is the one field where CXPO.ob has a high WI of 78%. The one well producing 2,500 to 3,000 mcfe/d is a good well but much less impact than the test of 9,000mcfe/d promised. The outlook for the followup well is also less than optimistic. Given the relatively high production rate of 48 million mcfe/d, CXPO.ob needs good sized wells just to offset depletion.

Another negative today is the sale announcement. This is a financial move. The bank may have been pressuring them, given the declining production to pay down debt. This reduces risk but also takes away production growth. It wouldn't have been major because of their low WI but Barnett Shale is the sexy area of ngas drilling and gave them good numbers to report in term of success percentage. I don't think it would have increased their production that much and it does reduce debt and interest expense.

Overall I was disappointed myself. After reading previous updates, I was hoping for stabilization and future increases in production. This latest shows that increases are going to be a struggle, not a given.

I am still holding. The stock is still dirt cheap but it may stay that way longer than I thought due to the production facts. Bobwins