What do you expect if you misread an announcement from a company...

What do you expect if you misread an announcement from a company that you don’t follow very closely and then post your thoughts on the thread of that company! I have never argued that the flow rates are “great” and you can check all my posts if you like. However, I am more than happy to spell things out for you as I see them.

As can now be confirmed from today’s announcement the W5 and W6 frac programs were intentionally invidivually small stages covering a relatively small overall part of the net pay. This is exactly what I have been arguing – i.e. the flow rates from these small frac stages cannot be used to conclude the commercial viability of these two wells or the entire field. Given the strategy of the W5 and W6 test fracs, the flow rates were never going to be commercial in my opinion. We are all still learning from the surface how this hydrocarbon system works 4km down but i think we now have an interesting plan of attack!

The small individual size of most frac sections in W5 and W6 was intentional, however this has resulted in lower flow rates due to the restricted penetrability of the small individual sections (i.e. larger frac sections like in W4 penetrate deeper into the structure and look to of resulted in proportionally larger overall flow rates per metre of net pay frac’d). Transerv have indicated in this announcement the fracture stimulation approach no longer needs to be constrained to structurally “quiet“ areas and the penetrability of each frac stage does not need to be constrained. As such, the company has stated there is potential to use larger scale fracture stimulation techniques throughout the entire section and that W4 will be a test of this strategy and that we should know the outcome very soon (subject to approval!). The company have also indicated a jet pump will provide a better outcome in W4 than the costly nitrogen lift method used previously.

And on a side issue, I have never in my long investment career used stock price movements or current stock prices of speculative companies to tell me if an announcement is good or bad. I rely on my experience and knowledge to understand announcements and make my own value decision based on facts, fundamentals and risk/reward. People who rely heavily on share price movements to make conclusions about a company’s prospects are simply sheep who do not know what they are doing.

For example, an ex-Director with over 80m shares has dumped his entire holding very aggressively since Dec 2015 and the liquidity of TSV has not handled this volume well. To counter this the broker handling the order has taken advantage of increased liquidity around sensitive announcements to increase dumping. Novice investors not understanding the announcements and what they had invested in, probably used the added volume and share price to gauge what was going on. They could have also sold, exacerbating the dump. Others may of front run this selling also contributing to the sell down. Clued on buyers pulled out bids and watched it fall further. We cannot say if this ex-Director’s aggressive dump was based on fundamentals or a divorce settlement (as I have joked) or liquidity for another investment, but someone was willing to take the last 20m of his stock at the low of 1.5c!

From my experience equity markets are rarely efficient and a fair value share price based on fundamentals is only temporarily imputed in a share price, even less often for a speculative stock without all the buy and sell side research, arbitrage, liquidity and sophisticated investors of an ASX 50 stock. I use my experience and knowledge to judge where that value / risk reward is for a spec stock and certainly not the ebbs and flows of a speculative and trader manipulated share price.

With larger scale fracture stimulation techniques utilised in W5 and W6 and a jet pump to manage water in W4 there is every possibility W4, W5 and W6 could be commercially viable.

Marxist