posted
AMEP has just posted the first of what will be a long, continuing series of announcements of new oil and gas production results in the very profitable Barnett Shale in North Texas.
AMEP closed today (12 Sep 06) at a nickel, a price that will never be seen again. It very likely will gap upward on 13 Sep.
The company, as some know from previous AMEP threads, has large and wholly-owned lease interests on 7000 acres of the Barnett Shale. These assets alone, undrilled, are worth a dime or more per share.
But unlike other emerging Barnett Shale O&G companies with lease rights, AMEP owns two of its own deep drilling rigs, along with another well refurbishing rig and other in-house equipment. It therefore doesn’t have to contract out the drilling of its wells at high prices or long lead times.
The company has been quietly drilling wells this summer, but until today, has released no information on the progress of these. Consequently, a significant number of shares have been sold off in the last several months from weak hands, parties who expected more rapid results (or who were merely traders).
It appears that most shares are now in strong hands, with those of us who know where the company will be in a few years. I’ve accumulated over 2.6 million shares, a bit over one half of one percent of all authorized or outstanding shares, and I have no intention of selling a single share for less than a dollar, sometime I believe, in 2007 or ‘08.
I will not outline here the company’s remarkable assets in any detail. Suffice it to say that anywhere from 40 to 120 (or more) wells can be eventually put in production over the company’s 7000 Barnett Shale acres, each of which could yield a million dollars or more per well each year.
The company’s lease holdings have several paying strata in addition to the Barnett. The full production potential won’t be known for a year or more, but by then revenues will be in multiply-ramping tens of millions of dollars. And the company is not sharing its lease rights with others. They are wholly-owned.
For a year or more “investors” (day traders) with itchy fingers on their numeric keypads have been trying to play this issue for quick gains. A year ago, the geologic promise of the company’s holdings allowed this, but for many months not a word has emerged from the company. As recent prices stabilized in the $0.06 to $0.05 range, most traders have moved on to other quick plays, leaving most fo the shares in hands such as mine, with those of us who have diligently investigated both the geology and the company.
The company’s drill rigs have not punched just this single hole into the Texas strata. Others are being drilled and completed and will be announced in due time. Like most young companies, progress is slower than anyone would anticipate or prefer. But the first hole has hydrocarbons. Collection tanks are being set up, and production numbers will be emerging sometime in the future.
Finally, AMEP is no longer just a story. For me, this is one to buy and hold. Any purchase less than a quarter per share will, in time, be very rewarding.
quote:"Completion began on June 18, 2006 when the well was perforated in the Barnett Shale formation. ..... This week the oil storage tanks and pumping unit have been placed on the well location and full production is estimated to begin early next week."
Also from the last Paragraph:
quote:The Nash-Murphy well has multiple pay zones that have the potential to produce oil and natural gas for many years, but as always the company will begin at the bottom of the well in the Barnett Shale and work to the top.
My understanding is that the casing must be perforated and the well fracture stimulated at each of the five pay zones in order for each of the zones to be produced. This cannot be done while the well is in production.
According to the wording of the PR, it appears that only the Barnett Shale formation has been perforated and fracture stimulated and that as soon as the frac water is removed "early next week" the well will be put into "full production".
This, IMO, means that the company won't be fracture stimulating any of the other zones for the time being. In order to do this, you would have to shut in the well, which means you get no production.
This may sound alarming at first, but keep in mind the company can come back at any time and fracture all or additional zones.
My guess is, based on the fact that frac treatments require lots of water, and Texas is having a drought, the company has decided to wait on fracturing the other zones and immediately put the Barnett Shale zone into production in order to produce revenues.
Even the big players in the Barnett Shale are having a hard time finding frac water, so consider AMEP's position.
Energy companies explore water options in Barnett http://weatherforddemocrat.com/cnhi/weatherforddemocrat/homepage/local_story_244 212504.html?keyword=leadpicturestory
This is all IMO though and I've only been in the NG industry for 2 years and deal primarily with NG and not Oil so if there is anyone out there who knows more about this please feel free to share. I am by no means an expert in this field.
Posts: 2430 | From: CA | Registered: Jun 2005
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