Spotlight Innovation Inc. (fka STLT)

[Ecomike]

Well I did some digging this week end, and it seems that MNLU / AEXP (merger partners) do not need to frack this well to make good money with the well. And Fracking it is at least 50-70% of their budget to bring the well on line (not including paying off old bills).

They can always go back and frack it later. But they need to frack it if they want to boost and maximize the proven reserves from initial start up flow data, and maximize initial flow rates to maximize initial cash flow.

But since there is not enough pipeline capacity nearby to handle peak flow of the fracked well, it makes no real sense to frack this well up front (according to some experts in the business, I am told), and it seems that fracking the well is on the dangerous side, risky, cutting edge operation. That may be half the reason they brought in the top world expert, Chilanger (SP?), the other half to bring in more possible partners, and deep pockets to the bidding table. It may be that the big money guys wanted a second opinion on whether to risk fracking the well now, versus later after the well has flowed for a while, and the pressure has dropped.

I now think that if push comes to shove that MNLU will back off on fracking the well, and just tie it into the existing pipeline (which should not cost very much to do, in fact they may already have the pipe on hand to plumb it?), to avoid BK and to avoid excessive dilution or excessive cost of a JV deal. Then they can go back later once the well and properties are proven reserves and borrow money from easier to tap sources using proven reserves as collateral, and get better offers for JV deals.

Also, IIRC the BP#1 well in the BV, Miss, play is on an AEXP lease, not an MNLU lease, and AEXP has very little debt (most of which is owed to MNLU). So I still think AEXP may be the safer buy here.