From a current Price of oil point of view the order should be:
4. Rig mobilized for GoM drilling (given a discovery here is commercial with low price of oil);
3. Cash balance;
2.Daily Reckoning Tipsheet spruiking OEL; and,
1. a distant last 88E sp going ballistic on drilling results from their well adjacent to OEL's Alaska permit (likely US$52 -ish break-even so not commercial at current prices).
Personally I don't think their (88E) announcement was particularly strong, however am impressed by the marketing of it... up 150% on fairly early tests in an area already known to produce similar results is hardly surprising...the issue is whether the 'discovery' is commercial which is not known yet and certainly is not the case at the current price of oil....
Finding an active shale is excellent, but is not exactly like they are hitting gas or oil there to a commercial extent. and what is surprising to me is that they're behind other ASX listed O&G companies, also in low sovereign risk environments, who are valued at less. One I have held previously in particular.
Based on that peer comparison, 88E have a massive E/V at present for a stock still looking at 2-3 years and about $30m in additional capital to commercialise. They might take an additional 18 months for some more core samples during the low cost exploration and low price of oil environment to bide time and then perhaps run a spot vertical fracking program to test the placement of propant in the rocks to enhance flows before they invest $10-15m into putting a large rig on a pad to test the shale commercial potential properly.
Anyway, IN SHORT, I would argue that OEL/BYE's Gulf of Mexico is OEL's best bet at present. 88E is a nice story but it is a study project that will take time and years, not a gusher that BYE could be, and 88E's tenement is certainly not commercial at the current prices. I would have thought US$52 would be break-even for 88E, compared to a discovery at any one of Byron's shallow GoM tenements being attractive/commercial at current prices.
Disclosure: am out of oil and gas stocks at present but watching inventory, production volumes closely and as a former BYE holder am watching SM6 reentry with great interest and expectation
GLTA
