OIP 0.00% 4.3¢ orion petroleum limited

13 points and 31 questions to be answered

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    This is Uncle Remus and I have been thinking about that e-mail that Second says he got in reply to a query from Mr Russell Langusch and about what Mr Hardmano says Mr Casey has told him, and if both of these are true, then I am totally confused about what is happening at OIP and why this insipid merger with GGX was even considered.

    And while I mulled over these responses from these two honourable gentlemen, I found that there were at least 13 points to consider, and while considering them, one by one, I realised that I had 31 questions that either one or both of these gentleman should respond to, to set our minds at ease and make us alert but not alarmed.

    So here are the points for consideration, and the questions that they evoke.

    1. On 25 August 2008, Orions Managing Director, Mr Barry Smith, stated; that Eastern Star is a leading operator of CSG resources in the State of NSW and their extensive expertise will help Orion to realise the CSG potential of our Surat-Bowen and Gunnedah acreage.

    "The Stage 1 and Stage 2 program, totalling four exploration coreholes and 100 line km of seismic, will be aimed at confirming multiple, high potential CSG exploration targets identified during a geological study that Orion conducted earlier in the year.
    So Orion had already identified multiple high potential CSG exploration targets during a geological survey in 2008. I note the exact wording multiple high potential CSG exploration targets.

    Question 1: So why did ESG not go and drill these identified multiple high potential targets instead of drilling Moree-4 and Kurrabooma-1, which revealed so little?

    2. In PEL 427, the core hole Moree-4 only reached 495m and for that, ESG got 50% of the PEL 427

    3. In PEL 428, the corehole Kurrabooma-1 reached 438m and for this ESG got 40% of the PEL 428

    Question 2: why did they stop at such a shallow depth when the drill was capable of drilling deeper, to explore for deeper coal structures?

    Question 3: If these two wells were part of the identified high potential targets, why were they not drilled to at least a 1000m depth , a depth similar to the wells on ESGs leases.

    Question 4: It is tempting to ponder on whether the core holes were drilled seriously trying to find the coal or were they drilled not seriously trying find coal?

    Question 5: Could it be that the wells were deliberately drilled in such a way as to play down the prospects of these multiple high potential CSG exploration targets.

    4. ESG is going to drill two coreholes in PEL 6 . At the end of drilling these two coreholes, ESG will end up with 75% of PEL 6.As such, much is expected from the results of these coreholes.

    Question 6: What is the basis of selection of the sites for these two coreholes.? Is the site selection based on the geological survey done by Orion or are they based on something else.

    Question 7: What is the total depth of Gwydir-1 going to be? Will it be at least 1000m or will it be only about 500m again??

    Question 8: If Gwydir-1 is successful, will the present board of Orion, in the best interests of its present shareholders, and to be seen to be doing the right thing towards them, terminate the scheme of arrangement with GGX by paying GGX the $100,000 break fee?

    5. Russell Langusch has replied that the CSG coreholes in PELs 427 and 428 were drilled to depths below which there was little or no prospectivity for coal seam development. If ESG and OIP had believed there were coal targets deeper, the coreholes would have been drilled to intersect them.

    Question 9: so is Russell Langusch telling us that they know ALMOST EVERYTHING about the area that they are drilling in and that they have very good evidence that deeper drilling would not have revealed any more coal targets.

    6. Russell Langusch also added that It must be remembered that CSG exploration in PELs 6, 427 and 428 is at a very early stage with little known about the coal seams in the area.

    Question 10: so is Russell Langusch also telling us in the same breath that they know ALMOST NOTHING about the area that they are drilling in, and if so, why did they not drill deeper to find out a bit about the area, so as to expand their knowledge of what they did not know.

    Question 11: what sort of fools is Russell taking OIP shareholders to be (ESG excluded) to tell us that they know almost everything and then, that they know almost nothing in the same breath, and expecting us to swallow that statement WITHOUT QUESTION?

    7. Mr Russell also stated that it is not an analog to ESGs projects to the south in the Gunnedah Basin.

    8. Question 12 : what is the rationale and evidence available that has enabled Mr Russell, MD of Orion Petroleum, to make such a sweeping statement about OIPs leases, especially as he has stated that that CSG exploration in PELs 6, 427 and 428 is at a very early stage with little known about the coal seams in the area?

    If he has that evidence, then his statement in 6 above cannot be regarded as truthful. If, on the other hand, his statement in 6 above is truthful, then it is obvious that his statement in 7 above is not truthful.

    9. On 8th December 2009, Mr Hardmano posted the following: With regards to the Moree and Kurrabooma drilling results David Casey indicated to me some time ago that the results were in fact positive and encouraging. The wells were only aimed at establishing that there is coal there and that they are gassy and only to 500m and they found coal and it was gassy, and 4-5m is not that shabby compared to a number of Qld csg coals. He indicated that they expect that there are deeper coals and even some Walloon equivalents and of course the Maules Creek coals being targeted now at Gwydir-1.

    Question 13: If this statement from Mr Casey is true, then it would appear that that statement by Mr Russell in 5 above is absolutely false, when he stated that the CSG coreholes in PELs 427 and 428 were drilled to depths below which there was little or no prospectivity for coal seam development. And that If ESG and OIP had believed there were coal targets deeper, the coreholes would have been drilled to intersect them.

    Question 14: What are the motives for us being told by the MD of our own company that there was no prospectivity for coal seam development when Mr Casey has indicated that ESG expected deeper coals and even some Walloon equivalents and Maules Creek coals.

    And we in the family privately expect them to encounter Bohena coal structures in this region too.

    Question 15: Why did ESG, if what Mr Casey has told Mr Hardmano is true, only drill the wells to establish coal was there when this should have been evident to blind Freddy after the geological study that OIP did? Why did ESG not drill further to encounter and test the deeper coals and Walloon equivalents and Maules Creek Coals and Bohena seams that Mr Casey knew were there. Why were the coreholes not drilled to at least the same depth that ESG has been drilling in its own leases?

    Question 16; And how come Mr Casey knows so much more about the possible coal deposits of Orion than Mr Russell Langusch of Orion ? If what Mr Hardmano has said is true, then this is a really big cause for all OIP shareholders to worry.

    Question 17: if Mr Russell Langusch and the rest of the Orion Board are proving to be so ignorant of the coal deposits that Mr Casey apparently knows about, then are they the best people to take Orion into a scheme of arrangement with GGX, and are they capable of getting Orion the best deal?

    Question 18: What was the exact reason that caused the previous Chairman and MD of Orion to resign. We, as shareholders are entitled to know about this boardroom fallout in full details as we are the owners of this company, and we should be fairly and uniformly be privy to all matters relating to the company. So why are we still in the dark about the true reason those board members left. We were told by Orion on 2 October 2009 that The resignations follow fundamental disagreement by the resigning Directors with Orion's major shareholders (Eastern Star Gas and Ingalls and Snyder LLC) regarding the future direction of the company and, in particular, whether potential merger transactions were an appropriate direction for the Company to take.

    It would seem that with the appointment of Mr Morton and Mr Lanfusch , both from the board of GGX, to the board of OIP means that the question of a conflict of interests cannot be fully eradicated in their dealings in the merger of OIP and GGX, especially as so many shareholders in OIP see this as an unnecessary and totally unsatisfactory merger for OIP to enter into now, just when they are starting to explore their full potential.

    Question 19: So why are the new Chairman and MD in such a rush to get this merger going before the drilling results are out and before OIP spends the cash it has on hand to do further exploratory work on its excellent leases?

    Question 20; were the previous board members pushed because they decided to stand up for the rights of their shareholders in a disadvantageous scheme of arrangement? Can the present board please keep us fully informed on what the disagreements were and what the retiring Chairman and MD had ewanted to do for OIP instead of what is happening now?

    Question 21: I believe an independent valuer will be making valuations of the assets of both companies prior to the scheme of arrangement being voted upon. Have the poor results from the shallow drilling of Moree-4 and Kurrabooma -1 adversely affected the valuation of the OIP leases?

    10. On 8 Dec 2009, Mr Hardmano asked Mr Lincoln Augustus the following: The fact that 7 months after the drilling in March and April we still have not seen gas desorption data or any statement of gas content for Kurrabooma is AMAZING .. and has lead me to conclude that there has been a deliberate "go-slow" in the OIP leases. Perhaps so as not to draw attention .

    Mr Russell Langusch has replied to that question with the following answer: The desorption results have not been received back from the lab yet. With all the current CSG activity there are huge delays having samples analysed and only 2-3 laboratories perform such work.

    Question 22; If that is the time frame that we work on, then how is it that ESG and BOW et al are getting their results to the market sooner? Is this a matter of having choosen the wrong lab or is it a result of things being allowed to run as slowly as possible? Is this one of the reasons the previous board members were unhappy and could this have been one of the reasons that they parted company with OIP?

    Question 23: what efforts have the present board and ESG made to hurry along the release of these results, and how is it that other companies are getting out results so much faster?

    Question 24: Only 2-3 labs perform such work....where? Is Mr Russell Langusch referring to labs in Narrabri, in Casino, in Sydney, In NSW, in Queensland, in Nairobi or anywhere in the whole world?

    In Jamaica, if you cannot buy a coconut at one stall, perhaps because the stall holder is a lazy mongoose or maybe because he has been told not to sell coconuts, then the natural thing to do is to go to the next stall and the next stall and the next stall till we manage to buy our coconuts. And heaven forbid if we find that there comes a time when there are only 3 coconut sellers in the whole world and that they are all too busy to sell coconuts because they are up the tree training those blessed monkeys.

    So that statement about there being only 2-3 labs does not make sense, especially as Mr Russell Langusch has not told us what the geographical area is where he can find only 2-3 labs performing such work.

    Question 25; so will Mr Russell Langusch please tell us what geographical area he is talking about when he says there are only 2-3 labs able to do the work.

    11. Mr Russell Langusch has said that both OIP and GGX shareholders will have an opportunity to vote on the proposed merger in late January. The necessary paperwork in currently being prepared.

    Question 26: If Mr Langusch says that booth OIP and GGX will have the opportunity to vote on the proposed merger does that mean that there are going to be 2 independent scheme of arrangement votes on this merger, one by OIP shareholders and the other by GGX shareholders?

    Question 27: Will Directors of OIP who are holding shares in GGX either in their own names, or in their company names or in their Superannuation Funds,or who have or have had an interest in GGX by being on the GGX Board or have been, till recently, on the GGX Board, (such as Mr Dennis Morton and Mr Langusch) be made to abstain from voting in OIPs scheme of arrangement vote, as there will surely be perceived to be a direct conflict of interests?

    Question 28: Or are the concerns of OIP shareholders in this matter going to be over-ridden by the OIP board allowing those who would be covered by question 27 to vote?

    I would find it a matter of concern if anyone on the OIP Board who owns GGX shares or who has an interest in GGX by having been in any way connected with the GGX Board within the last six months is allowed to vote in the important matter of whether the GGX shares are to be converted to OIP shares in a ratio that appears to be most detrimental to existing OIP shareholders, irrespective of any valuations that may be bandied about.

    12. It is reported in the Sydney Morning Herald of Australia that And it couldn't have happened at a better time for Apollo, which had its debut yesterday on the Australian Stock Exchange at double its issue price.
    Apollo has an interest in seven exploration licences covering 23,600 square kilometres in the Sydney-Gunnedah Basin in NSW. The company said the licences included potential coal seam gas and conventional hydrocarbon targets close to existing infrastructure.

    I have to comment here that the above statement could have been as easily written to describe OIPs leases, which sit in the Gunnedah Basin, The company has PELs that include potential coal seam gas and conventional hydrocarbon targets close to existing infrastructure.

    Question 29: so why is the new board of OIP not reconsidering this merger deal and why is it not putting the interests of existing shareholders first and why are they allowing this dilution of OIP assets/share by this merger with GGX. There are no synergies in the areas of operation between the two companies and the two companies are as unlike as chalk and cheese and the merger talks can be broken off by paying a break fee of $100,000, which does not appear to be that much when the big picture is considered.

    13. It would be apparent that there is much renewed interest in gas and CSG after the Exxon purchase, and it is very likely that OIP will be a takeover target sooner or later, most probably by the likes of ESG or STO

    Question 30: if such a takeover was to occur, what value could be attributed to the "assets" that GGX is bringing over? It would seem to us that the obvious target would be OIP's NSW assets, and the value of OIP would be seen to be in these NSW assets by the predator. We can see nothing that GGX brings across that could affect the takeover price favourably, so why have the merger?

    Question 31: so why should GGX shareholders be given a free ride at the expense of OIP shareholders by being given a free exposure to OIPs valuable assets, especially when there is every likelihood of a takeover of OIP, either now or in the future when the drilling is completed properly.

    13 points to consider and 31 questions that rack my brain and 31 questions that need to be answered in full.

    A Tobias

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