Hi JC,


Yes, I’ve been in POE since just after the L53-E discovery a year or so ago. I bought into Mgnt volume estimates and was impressed by the thickness of the sands and the promising flow rates. Unfortunately, the structure was not nearly filled to spill, and started watering out very soon afterwards. Becasue of this and earlier over-promise / under delivery in the volcanic assets I tend to mainly focus on the P90 estimates from POE. I decreased by position somewhat before the dividend last year, but it is still a significant holding for me, about 7% of my portfolio.

The know where the updip is, it’s just that I haven’t seen any map or read anywhere how far down on the structure they placed the first well. I would assume there is not so much more to go at updip, you would not want to risk placing your expl/appr well to far down dip, as you might risk finding only water and not knowing if there is oil updip. The twin well will probably be placed as close to the fault as possible, in order to drain whatever oil there is. What we don’t know yet, is if the size of the other pools are different, i.e. will you have a larger oil column / deeper OWC in the shallower sands. I would not assume so, often the height  of oil columns in stacked sands are correlated, but there are exceptions too. So, I would not expect DC1 to produce a lot, but hopefully the twin well will. The additional upside on that one is that it will drill deeper and hopefully find additional oil charged sands (with potentially lighter oil)


I’m not quite sure what you mean by “Do oil firms typically assign value to exploration properties (eg Indo) or just reserves / barrels flowing” ? Obviously, a company like POE places great value in their exploration targets, that is why the spend capital there. What you normally do in order to decide if a well is worth drilling is that you look at your prospective resource estimate (a low-base-high range) that you derive from calculations of oil in place (size of the structure * net thickness * porosity * oil saturation * 1/FVF) and multiply that with your recovery factor. That gives you gross recoverable prospective resources, which you then multiply with you Chance of Success (CoS or Pc). Finally you apply a value to a barrel in the ground based on your cost forecasts, the price you receive for your oil, the fiscal system you’re operating in and a projected production profile. Against this you weigh the cost of the well and you will see if you have a viable exploration target. For POE, due to low well cost, high prices and a very beneficial fiscal system, almost any discovery they make is worth putting into production, so exploration economics are very robust.


Or by “oil firms” are you thinking about the brokers and how they value oil companies? They usually divide it up in core-NAV and risk-NAV, but I guess you know that….if you make you question a bit clearer I will try to answer you again.


The Sawn Lake…yeah, I personally do not assign a lot of value to that asset, because 1) heavy oil assets in Canada needing capital are a dime a dozen, especially in the current depressed WCS price regime. IF POE manages to prove up the concept technically, I would assume they will try to get rid of the asset, since developing it fully is way beyond their reach in terms of capital. Lately undeveloped SAGD properties has not been a very active market due to the issue with lack of pipeline capacity and depressed WCS prices, so it is hard to ascertain what price POE might get.  I’m not following this segment very closely, so I’m not sure what is the best analogue company to Andora. I seem to remember that when POE increased their ownership, they value Andora at around 100 MUSD, so maybe 70% of that is a fair value? To me, the less they spend on this asset, and the sooner they get rid of it for a decent amount, the better it is. It doesn’t fit the POE story at all, IMHO.

Hope it helps,