GDN 0.00% 1.7¢ golden state resources limited

risk versus reward...

  1. 15,276 Posts.
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    I notice the “beware” team is out in full...but I am afraid they will need to present us with facts if they want to be taken seriously.

    Real facts by the way...not selective quoting or "distracting" from the main game with options conspiracies, or inaccurate data.

    Byt the way...the options are part of a "success" renumeration strategy...I have no problem with them.

    They were clearly disclosed in the prospectus, with various hurdle target prices that at the time, were more than fair. Interestingly, the prospectus mentions they will be issued at a price no less than 20c...for all we know, without the facts, their strike price may well relate to the prevailing share price at the time they are issued? even I am being distracted from the main game, which of course is the current well.

    I will add however, in addressing a less then genuine attempt to paint the well as some kind of throw away hope...distance from nearby accumulations is not a sensible argument. Anyone with oiler knowledge will tell you, being on trend in such an oil basin, with reported untapped reserves of over 1b barrels...that being just 70km from similar prospects is actually considered a positive!

    But on this note...have you not forgotten the significant Greater Cisco reserves to the North? Lisbon may be 70km away to the south…but what about Cisco?

    The point is, GDN’s ground is on trend in a know hydrocarbon play…and…we have clear evidence of hydrocarbon migration through the prospect at virtually every formation level.

    All they need is to find trap and appropriate host!

    Please people, try not to be persuaded by some of the low-life agenda driven diatribe filtering onto the GDN all means, lets hear alternative views, contrarian outlook, whatever, but keep it factual...and please try to provide sensible reasoning.

    Anything less and they are arguably doing nothing more than putting forward an "argument" prepared long before they ever looked at any of the facts!

    Such behavior is not “presenting an alternative view”, as they will have you believe…it is nothing more than opposition to an idea just for the sake of it...or worse, servicing some less then genuine motive?

    Anyway...enough with the "distraction"

    Any and every "drill" carries risk...this goes without the drill gets deeper and deeper however, the pre-drill risk is replaced with ongoing results, either good or bad.

    To date, we are getting plenty of good “signs” of a potential commercial find here...and the "language" from the company has gradually moved from ambiguity to more specific declarations.

    Clearly however, we will not know for sure the specifics of what they have found until drilling has finished and behind casing tests has been completed...and even then we will not know the true nature, size or commerciality of the find until considerable production testing has been completed.

    Clearly however, all indications to date are of some level of success...and with pre-drill prognosis of a minimum of 40bcf required for a viable operation, the use of the word "material" from the company clearly suggests they at least have more than this.

    We have broker valuations of $1-$1.50 placed on a 50bcf one is inclined to believe, given what we can deduct so far from company dialogue, that anything under $1 (assuming they have 50bcf) carries relatively little risk.

    This is not rocket science…however we are relying to some extent on what the company is telling us…via official ASX announcements.

    As it should be!

    If they have found more than 50bcf, then we can start to look for higher prices.

    To this end, ignoring for a minute what they may or may not find further down in the primary target, it may be worthwhile trying to understand the potential size of what they have already offered to the market as "likely producing intervals".

    One in particular is very exciting to me...namely the Upper Ismay accumulation, which appears to have net pay of 10.4m gas and 6.1m oil.

    Although not as thick as the Akah interval (15.5m), the Ismay zone has been intersected on the marginal outside flank of the accumulation, from which we can make two key deductions...

    1. The structure is potentially full to spill point...equating to a closure somewhere between 1,200-2,000ha

    2. A drill placed more optimally near the peak of the structure, or perhaps drilled horizontally from the current platform, could result in significant intervals and subsequent flow rates.

    The remaining "pay" so far, comes from the Pennsylvanian Barker Creek Structures, with Akah (15.5m) and Barker Creek (4.4m +??). The drill is more centered on these structures, suggesting no real thickness upside due to structure offset, however being centered on the 1,200ha closure, we might be able to assume at least half of this area is charged...who knows, maybe all of it is?

    We will have to wait for confirmation however.

    We need to realise however that Barker Creek is still a bit of an unknown...we know they hit 4.3m of pay when they first hit it...and we know background gas has doubled as they drilled deeper, so it may well be we have more to come from this formation than what has been released?

    So...looking at what we have to date from an amateur’s perspective...

    Upper Ismay: Gas - 2,000ha x 10.4m (min - potentially up to 30m+ thick)
    Upper Ismay: Oil - 2,000ha x 6.1m (min - potentially up to 15m+ thick)
    Akah: 600ha x 15.5m (max thickness) gas
    Barker Creek: 600ha (?) x 4.3m (+?) gas

    Remember, these are just the obvious zones, there are many other "shows" which may well prove commercial after testing...we do not of course know this yet.

    By the way...I would appreciate some feedback from some of the more informed oilers out there, who may be able to shed some light on the economics of such large accumulations?

    So, we look to have enough already to make this commercial...of course we don't know this for sure yet, which means buying now carries much more risk than if we wait for definitive details...but I doubt you will be able to buy-in at current prices should such results confirm the nature of what we may well have here.

    This "risk" here therefore may well be viewed as a two way proposition...get in early and “risk” bad results, or wait for results first and “risk” paying much more.

    We all have our own "risk" tolerances.

    Then of course we still have the "what if" factor...the significant lower targets that have everyone’s interest.

    In this regard, the drill from here on is no different to many others...and as such, should carry an appropriate risk they, wont they?

    We have encouraging signs, but we simply don't know?

    I must say, I find it interesting that this primary structure appears to have the same basic footprint size as the already successful upper light of this, it will need to be a pretty big interval to achieve 3tcf? In my view they will not, but I was never really expecting them to get 100% of their potential upside oil game simply doesn't work that way.

    In my view, the goal is really to get more than 50bcf...and preferably something in the 400bcf range...anything more would be an absolute bonus.

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