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i would agree with most of that. i do think shareholders deserve some sort of explanation for persevering with K when it wasn't the primary objective and the drill wasn't in the optimal location for this zone
I was hoping to halve my investment at about 80p which was a conservative estimate of what we had before the drill results. I await the webinar with interest and hope that it encourages existing shareholders to stay with the story for another year. But I am now overweight for a longer term investment. Extremely disappointed I just feel the existing BOD take too many gambles and should instead prove up the easier targets get some cash flow and then go for broke. I think we have a winner in the right hands. There is an old saying good management can make bad assets sing and poor management can ruin good assets. Fingers crossed.
Followed by:
What else do we know?
First, that the risk of gas condensate or any other "problem fluid" was not realised.
Second, given that the true reservoir characteristics in the Kuparuk only became clear just before the weekend, the company had done the opposite of what should be done with the benefit of hindsight. The Kuparuk is a world class discovery in its own right. That people are writing it off is to miss the point of the statement in the press release regarding recovery potentially not being as high as originally expected.
Third, the well planned this summer is an appraisal of BOTH Alkaid and Talitha (or whatever naming convention they apply to the field now that they realise they are one accumulation). The tricky part is that the units will likely end up having to be combined (and additional acreage from Theta West and the recent lease sales added in) after this result so there will need to be a negotiation with eSeis as to how their royalty will work and ditto with Otto Energy.
Fourth, the company has a range of financing options on the back of this result, including convertible debt instruments that will limit the dilution that would be required to complete the program for the next 12 months. Whether Farallon sells into the result or not, there are a number of approaches that could be used to extract a full value of the assets for existing shareholders.
If you are selling because this is a short term trade that went wrong, obviously that is your prerogative. If you are selling because you are worried that the story does not stack up, I would strongly suggest waiting til after the webinar. The press release certainly did not accentuate the good news - I am not sure anyone reading it was able to get past the disappointment of the Kuparuk headline flow rate number. I was expecting nearer 500 bopd but truly believe that flowing any oil was a good result with the benefit of hindsight.
What Does Today's Pantheon Press Release Mean?
On the face of it, the press release contains some disappointing news that the Kuparuk did not flow as anticipated. This appears to overshadow the other news which is extraordinarily positive. The key question: is do I think the company is worth more after this result than it was before? The answer to that is an unequivocal yes!
First let’s deal with the Kuparuk. The zone flowed intermittently at rates up to 100 bopd. This sounds like a not very good outcome but let’s put it in context. They likely fracked a small interval of the worst quality formation (because that is better for initiating the frac) in order to get the whole of the interval to flow into the resulting fracture and this should have led to 500 bopd as a planning case. The Kuparuk formation consists of a poorer quality A sand which lies below the better quality C sand. Based on where the perfs were vs the top of the formation, I interpret that they only perforated the A sand and intended to link all the sands with a small frac. I understand that the formation exhibited characteristics where the use of a water based frac fluid actually reduced the flow rate that could be achieved. As a result, the fact that the well flowed light oil at rates up to 100 bopd is actually a good result and bodes well for the ability in future to produce at commercial rates. This will eventually be seen as a world class discovery in its own right with appraisal locations significantly up dip and the learnings from the operational problems being clear enough to ensure that the next well will produce at substantially higher rates.
Now let’s turn to the BFF. The well encountered several hundred feet of the Basin Floor Fan (now called the Lower BFF) which I imagine will be renamed as Theta West since the company has indicated that it is all one accumulation based on its recent acquisitions at the lease sale. I estimate in round numbers that they have approximately 100,000 acres covering a formation that improves to the west but was 600ft thick at Talitha. Assuming net to gross of 40% and that the average thickness is only 800ft across that area you can probably do the maths. It is no wonder the company has been reluctant to state this up front - they probably think nobody would believe them. However, Theta West may turn out to be the second largest conventional field in all of North America. I think it is an understatement to say that there will be interest in a farm-in after this well.
The company has not offered any guidance yet on the Upper BFF but at 150ft this could be large in its own right. Similarly with the Slope Fan System. I will be waiting impatiently for the resource estimates - one being a whole new zone and the other likely to be an upgrade on their pre-drill estimate (which, with the benefit of hindsight, they probably wish they had released prior to the well so we would have a clearer idea of how much better this result is than expe