I believe you are an experienced oil and gas player who is injecting a strong cautionary note on the downside prospects, and your perspectives ought to be seen in that light, even though I believe your sense of caution is extreme, and unwarranted by much of the available evidence.
That said, for me the crucial period is the end of 2014: by then, MP West Canada SAS will be in a position where it could elect to take a 50 per cent working interest in the remainder of DWOG's position in the reservoir, with operatorship.
If MP West Canada SAS does so, it will effectively mean that Maurel et Prom has exercised its option to take control of DWOG and develop the entire reservoir with its expertise. It would then be left to the DWOG shareholders to benefit from DWOG's portion of the revenue, while facing no expenses other than -- possibly -- paying back the DWOG proportion of the $110 million financing Maurel would need to commit, to avail the option.
That's why I believe your projections of Q1 and Q2 2015, with no profitability foreseen by 2017 or 2018, seem wide of the mark.
On the other hand, if Maurel decides upon evaluation that it will not elect to exercise its option, then DWOG will be in the market for other suitors, and a possible takeover bid, and your timelines for evaluation and eventual profitability may be closer to the mark.
While the Q4 2014 election date is a deadline, even more important is securing approval for the HCSS pilot on the half-section 10 of DWOG's 90 per cent lands. I believe you are right, that an experienced player like Maurel would think it foolish to run two pilots simultaneously. Thus, were I in their position, I would carefully evaluate the results of the SAGD demonstration, take at least the first two quarters of 2014 to carefully study what is coming out of the ground, before determining that the HCSS should be launched. This would in any case be wise, because much of the equipment used for the SAGD might be recycled for use in the HCSS pilot, thus significantly reducing the Capex for both projects. So if DWOG announces by the third quarter of 2014 that it will undertake the HCSS pilot, then you can be sure that it will be with Maurel's approval, and it would be a clear early signal that Maurel will elect to exercise its options.
So I'm not dismissing your cautionary note, simply explaining another plausible perspective on the same facts, one that is shared by most posting on this board.
Let's wait for the HCSS approval which in itself is a huge catalytic step, as it would mean the Alberta Energy Regulator has cleared the way for Maurel to commit a further $110 million to reservoir development including the HCSS pilot.
