Replies to post #658 on GulfSlope Energy Inc (GSPE)

[tricky20]

Necrow,Trip,GSPEX-thanks very much for your thoughtful and valid comments.I will pick up on a few things:

Firstly I think you all (and I) have done quite thorough DD on Gulfslope and we all feel that we have a fair handle on the fundamentals, the risks and indeed the potential.The risks are clearly in the name "Exploration & Production"-if you explore and do not find and cannot produce you are finished-we all knew this when we invested.But we also saw a highly professional, highly skilled, highly experienced and historically successful management team who have invested considerable amounts of their own money and own 33% of the business.So we like the risk reward.

Secondly-how did they manage to win bids on these highly exciting blocks.You will remember, when they bid back in either 2013 or 14 (I cannot remember exactly)the oil price was sliding fast-there was no capital for juniors and majors were aggressively slashing exploration budgets-we got lucky because we had cash at the time so put in multiple bids and won most of them-alot of people simply did not turn up at auction due to lack of capital-that was lucky for us.

Thirdly on the shorters-I have to agree with Necrow-if you look at GSPE on a quantitive basis alone are the models do-it is going bust.However if you have greater qualitative knowledge-as we do you know that is not the case-unless of course they find nothing.

Let us hold our nerves Gentlemen-we could of course lose everything as you have all acknowledged,but with luck and management skill this could on a 5-6 year view be huge and then we shall meet and sit beneath the palm trees sipping Bollinger and discussing how well our Churchills draw!!

[necrow]

Gspex - I would absolutely love to hear your bear case if you have time to type out even an abridged version at some point. I undoubtedly can't match your industry-specific knowledge here and am only able to analyze to that same depth on the financial/investing side of the house.

What I've learned, though, is that plays that are based on an assumption that those on the other side of the trade are less informed are usually too good to be true. The deck is unbelievably stacked against the individual investor. The only reason I'm even considering that this is a legitimate opportunity is the incredibly low trade volume. That has the stamp of small-time algo traders as opposed to big money.

That's why I'd love to hear your bear case. If we get a legitimate argument laid out against the company that isn't terribly compelling, I can accept that institutional money just hasn't gotten privy to this stock. Otherwise, it's incredibly unsettling to have that thought constantly lingering in the back of my mind. Information is everything in investing, and wondering whether you're on the wrong end of the information mismatch is a terrible feeling


Re: potential financial troubles, my point is this: I feel as though it's unfair to gloss over some of the financial risks that the company may face with the catch-all of "Seitz will take care of it."

[Trip-Fontaine]

My primary concerns: depending on what they discover when drilling these two prospects, their strength in further negotiations with Delek and others might be affected. If the geology turns out to be less favorable maybe Delek wants to re negotiate the terms of the agreement rather than pulling out entirely. Maybe we find 50mboe after drilling 6 prospects, however by then we might have 10% of it instead of 20.
Also a senior listing is not a done deal, I dont know the requirements for Nasdaq or NYSE but GSPE will most probably have very little cash on hand during this entire drilling campaign, a very volatile share price, and also any up-listing will be in concert with a reverse split. Staying on OTC is staying under the radar which also equals low investor attentions and less ability to obtain financing at reasonable terms. With both current significant insider ownership and Delek showing intentions to own a part of GSPE there is a chance/risk of this company going private at a low price tag early in this process.