Ann: Gemba-1 Gas exploration well, page-43

The majority of my last post was about oil not CSG, so this post will be exclusively about vertically drilled oil to keep things on track.


You assert that Senex should have been pumping oil at 1.5mbbls a year over the past 5 years as opposed to the 0.9mmbbls they have probably averaged.
Senex currently has 8million barrels of 2P oil, at 1.5m barrels a year that is a reserve life of less than 6 years.

Had they been pumping that 2P oil at higher rates over the last few years then most of that oil would be out of the ground now and sold at a cyclical low of the POO. Vertical wells are quick to attain plateau rates and then enter natural field declin

Why would you want to drill wells and get a low rate of return on the product of those wells when you could wait for a better point in the cycle. Oil hit sub US$35/b and you wanted Senex to be pumping oil at high rates? Senex would have been losing money at those prices - Even the big boys of BPT/STO need rates of US$40 to think about breaking even. We dont have the production base to spread out fixed costs like they do.

Only recently could you hedge oil at a reasonable rate to warrant an increase in investment.


Instead of pumping oil at a depressed POO, Senex still has the oil in the ground but has since deployed a method to increase the ROI and overall recoveraibilty of that oil - enter Horizontal Drilling.

Senex would have sweet bugger all oil left in the ground by now if Oil had been pumped ovee the last 5 years and would have had to have embarked on a significant exploration spend to replace the reserves which may not have found any oil. Exploration is inherently risky and expensive. 20% COS on most wells in the better acreage of the Western Flank is not exactly what you want to be betting the future of the company on, let alone the less prospective other acreage.

Senex has no 2C oil (ie any oil we know about that isn't already 2P - is subeconomic) - Exploration is needed if reserves are to be replaced and your production rates are to be maintained.

Unless of course you know where more economic oil is? then please advise Senex ASAP.