AI
Thursday, October 11, 2012 3:48:50 PM
What is exciting to me is, ERHE is again in a situation as it was pre-JDZ drilling, with the share price and early acquisition stage of the assets having a share price as shown by the star. I know many people bought into ERHE closer to the intersection of the red and blue when exploration of the JDZ had already reached a stage where there were clear seismic targets and independent reserve estimates, but the share price was much higher and needed a discovery for a big win. But many also bought in near the current price, and had several opportunities to cash out with a 5 or 10 bagger.
We will very likely see a repeat of the same phenomenon again with Kenya, Chad, the EEZ and new acquisitions being bid for IMO. But here we are with a 12 cent possible buy in again, which was historically a very profitable buy zone for ERHE just on exploration excitement. 5 or 10 bagger possible on just exploration excitement just like in the past, without a drop of oil discovered. Yet again, but now with several asset groups.
Another huge difference is the timing. We saw how many years, delays and complications there were in the ultra-deepwater JDZ, including politics and legal challenges to get to that good target, pre-drill exploration stage share price high. In Kenya and Chad it can all happen in the conservative one to two year period which assumes ERHC has to raise all the money and go it alone, or even faster should a JV farm-in occur.
Also considering the low cost of onshore drilling, rig and crew availability and sharing, and other cost savings, there reaches a point quickly where the cost of additional 2D and 3D seismic becomes comparable to just reconnaissance by drilling. With the drilling providing actual samples of the geology and hydrocarbons. So after the initial work, there is the decision to be made whether to just drill, or spend more on studies. Very different from the economics and timelines of ultra-deepwater.
We will very likely see a repeat of the same phenomenon again with Kenya, Chad, the EEZ and new acquisitions being bid for IMO. But here we are with a 12 cent possible buy in again, which was historically a very profitable buy zone for ERHE just on exploration excitement. 5 or 10 bagger possible on just exploration excitement just like in the past, without a drop of oil discovered. Yet again, but now with several asset groups.
Another huge difference is the timing. We saw how many years, delays and complications there were in the ultra-deepwater JDZ, including politics and legal challenges to get to that good target, pre-drill exploration stage share price high. In Kenya and Chad it can all happen in the conservative one to two year period which assumes ERHC has to raise all the money and go it alone, or even faster should a JV farm-in occur.
Also considering the low cost of onshore drilling, rig and crew availability and sharing, and other cost savings, there reaches a point quickly where the cost of additional 2D and 3D seismic becomes comparable to just reconnaissance by drilling. With the drilling providing actual samples of the geology and hydrocarbons. So after the initial work, there is the decision to be made whether to just drill, or spend more on studies. Very different from the economics and timelines of ultra-deepwater.
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. – Warrant Buffett
