Magna, page-72

Yeh, I'm back from lunch at last after a peddle around the rice paddies and a few otheries (coldies) - beautiful, but sweaty.  

hey mandurah man, take ya finga off'v the return button occasionally, ya keyboard will last heaps longer.

I'm just in the mood for taking a larger perspective on OEX and where it's going.

The long and the short of it is OEX is basically your small, vulnerable, explore - a speccy explorer.

These companies are meant to explore, strike a find and/or fall over. The global landscape is littered with rusting failed explorer rigs. They are the highest risk gambles there is.

OK, the O&G space has mega majors as producers, they pay a premium to take out small speccy explorers that take the risk to find the resource, they step in with deep pockets and long time horizons to make a profit to cover their expenses/risks, including the original buyout of the speccy explorer's assets.

Back to OEX, we are a vulnerable speccy v/high risk explorer.  OEX is not a developer or producer, we really don't want to be - we (minor explorers) usually sell out to well resourced majors at a premium to cover costs plus risk and retain a royalty stream if possible.  These costs are for admin and drilling, testing - you know all the CRs we have been putting our hands in our pockets for and diluting our holdings for.  

Assuming an average to commercial flow test result, our eventual asset sale price for Cambay ideally should aim to recoup money spent - but it is highly unlikely to do so because of realised/incurred risk (76H!), which we bear. This equation benefits the newbies amongst us, at the expense of the LTs - such is life.

So, where does that leave us punters?  Well, I think I owe our long lost friend blackhat an apology (its not my first) but he does have a valid and important point .....
"... so let's all hope that RM's conservatism avoids this suspicion and he spreads the word as soon as he can. In my mind, there is little doubt that the well will flow and initially the flow will be good, but it is a tight reservoir and the depletion curve is steep. Initial volumes will give a hype, that's when we all need to look at our portfolios."

In all seriousness, OEX is an explorer which means risk - that's the game we (OEX) is in. It's not a developer or producer and I do not think that it wants to occupy that space.  

When we look at our portfolio's, there is no common approach, it's a personal decision about where we draw the line to start taking money off the table.  And please, it's not a boom or bust outcome - it's nuanced to individual needs and risk tolerance. So, going into this fracc and testing period I'm taking close stock of my longer term strategy regarding OEX, including an exit strategy, timing, staged sell down - and/or a free carry.

So I would suggest that it's prudent not to dismiss blackhat lightly (not like me).  Reading back over the flow of posts today (nearly yesterday for you guys!) I realised that I had overlooked a possible nugget - B/H had kindly thrown us a bone, a timely reminder.  And without any disrespect to our friend, my mum always said that you often find the best nuggets hiding under the sh)yet, you just need to be willing to stoop for them.

This has a ways to play out yet - more rough road ahead.