Replies to This Discussion

Permalink Reply by William Burch on May 11, 2011 at 8:26

I've read through the 61 pages of materials and have to say what an interesting story.  I work with the guys that capped the 1981 well - it flowed poorly on divert while they continued to drill the last 2,000 feet with a snubbing unit (good luck finding someone with a big enough set today willing do that!) However, I'm struggling with the 500 BCF estimations from a 41 ft core and then projected over the entire 2,000 ft interval with some assumed radial boundary.  That sounds like total stock fluff to me.  None of my colleagues would be willing to make a claim like that with this limited kind of data just out of professional responsibility.

 

In addition, although I'm no reservoir engineer (I'm a drilling/well control engineer), I would like to remind everyone here that 500 BCF GIP is not what would be recovered at surface (or even the 9.4 BCF per well number.)  There's a real killer to this story in that at 20,800 psi, the gas compressibility (Z) is actually a bigger number than 1.  In fact, it's 2 if you assume 400 deg F and 96% Methane and 4% Ethane (very dry gas.)  If you recall back to ideal gas law (PV=nZRT) the theory is that the gas molecules are so highly packed and moving around so fast due to temperature they actually repel each other instead of getting closer at this kind of pressure (kind of counter intuitive where you'd think they'd get just closer and closer - remember, dry gas doesn't liquify at this P/T.)  Therefore, once you starting producing, the gas molecules actually relax and space out a little bit then begin to get closer as the pressure drops right at surface (maybe downstream of the choke if the FWHP is super high.)  So, until the reservoir (shale or otherwise) has been drawn down to 2,500 psi or so, Z>1.  But drawing the reservoir down this low can't happen either because your abandonment pressure at 2,500 psi would be 2.3ppg EMW.  MS will dictate how low they can pull the reservoir.  And, although Mainland did a crappy job on casing design, if someone wanted to drill into the Smackover or Norplet, you'd be dead in the water trying to hold back the abnormal pressure above this zone and the massively depleted Hanyesville zone to even drill into the deeper targets.

 

In summary for now until the well test in August: (1) I don't buy the 500 BCF number one bit (2) 9.4 BCF of recovery is highly unlikely because it's not what you'll see at surface (3) they can't drain all gas out of the reservoir (assuming a volumetric reservoir with no aquifer support).  And, if you look at the deep gas wells that have been drilled in the GOM shelf (in particular the ARCO wells drilled in the early 80s) at this kind of reservoir temperature and pressures, they flowed mostly CO2 and water with VERY little gas.  Almost as if the gas had been broken down further into simpler components.

 

Although this post may seem very pessimistic, I deal with some of the biggest and most challenging wells on a daily basis.  And, IMHO, the facts to date don't add up for this well.  Now, can it be commercial?  Yes, because the shallower Cotton Valley/Travis Peak sands might be an actual play for Mainland.  However, don't be stuck holding your cards waiting on the Haynesville to be the pay dirt.

Permalink Reply by Bruce Badeau on May 11, 2011 at 12:36

William:

 

Your post is all very interesting - thanks for a different perspective.

 

I am not an engineer but a finance guy with just enough knowledge to make me dangerous. I have written a conventional reservoir analysis tool - mainly pressures and pore spaces available to hold pressurized gas or fluid. I have a copy of my now outdated Dec. 2010 Speculative report available at  bruce at fser dot net .... Free...

 

I have been worried for some time ( that is why I sold my entire profitable long term position at $0.93 and later ventured back with my smaller, profitable trades and finally bailing the trading position at $0.73 ... actually at a two cent loss for that specific trade one day before the plunge - lucky - maybe a little skill - technical's looked tired ) that without horizontal fracturing MNLU may be relegated to a cylinder of production, measuring 2000 feet deep by 600 feet in diameter ( the average extent of fracturing may be around 300 feet sans any natural fracturing communication and this is a really big and important assumption - any communication could substantially increase the recoverability )  and the recoverable reserves (in the cylinder) may not pay for the cost of the well... How many wells in a 640 block are required...?? 3-5 and at $13 million the deal is marginal at best...

 

Now I don't want to sound like " I told you so", because definitely that is not my aim. I actually like the people and the company.  However, we are coming to the point where buying MNLU may be really smart... REMEMBER - the reserves in the Louisiana Bossier and the Missippi Tuscaloosa (in the current cased well) are more than the share price by a reasonable margin... I had an old estimate of $0.50 per share NPV... and here we are in the $0.30 range...

 

Still watchfull and hopefull...

 

Bruce Badeau

Houston, Texas

Permalink Reply by Flip Phillips on May 12, 2011 at 0:40

I have both mineral interests and stock interest in Mainland. And I'm much more optimistic than the 2 previous posters. I've been selling a small % of my royalties as a hedge and I can tell you, there is a lot of interest in buying the the mineral and/or royalty interests from some very knowlegable and experienced people and groups who live and do business in the southern region. Combining my first hand knowlege of that with the fact that GEO, LLC is comfortable putting $800,000 of their funds into the completion, I'm still very optimistic that there will be future royalty $$ ....both near term and long term.

 

On the stock front, I've been buying right along. Special thanks to the manipulators who have driven the price down on such rediculously low volme.....sneaky but affective. Sorry some of you got caught up in the selling side of the slide. Remember, for every share sold, one is bought. Also, in agreement with Bruce, Mainland's existing assets alone are far more than 35 cents/share. In fact, they are far more than Bruce's 50 cents/share. Now couple that with a reasonable 'small cap' multiple, when this company gets close to completion AND the stock promotion  starts....you can figure out the rest.

 

That's my story and I'm stickin with it.

Permalink Reply by Skip Peel - Mineral Consultant on May 12, 2011 at 1:05

Re: "Mainland's existing assets", IMO, MNLU intentionally overvalues it's non-producing shallow rights in DeSoto Parish.

Permalink Reply by Flip Phillips on May 12, 2011 at 6:29

Who said I'm selling royalties to buy a penny stock. They're mutually exclusive. Plus, I don't have to plan for retirement....I already did and I already am.

Permalink Reply by Joe Mag on May 12, 2011 at 1:51

I would have to say that I have read a lot of positive and a lot of negative here and all in all I would say that I believe that there will be a good outcome.  There is nobody who can tell what is going to happen.  We will all know by the end of the third quarter what is to be. Obviously the first well will not make money but if all goes well what a door it will open will for everyone.

Permalink Reply by Checkmateking on May 12, 2011 at 2:10

I will say in my honest professional opinion that I would RUN not walk from Mainland resources. Their press releases scream pump and dump.

Permalink Reply by Joe Mag on May 12, 2011 at 2:27

I guess we all reserve the right for one "I told you so" to the party who was wrong after all is said and done. I will remain in favor for the project to produce.

Permalink Reply by Flip Phillips on May 12, 2011 at 6:49

I'm with you, Joe. I've had a long career doing things against the advice of most. I've always approached those projects with the idea that if it was the popular thing to do, there'd be too many people doing it. I love doing things that make people scratch their heads and roll their eyes about. Most of them just don't 'get it' (thank God).

 

No guarantees in life....(speaking OT, my wife fell down the basement stairs last night. Broke her 2nd vertabra, her wrist, her elbow, and gashed her forehead to the bone 3' wide and lost a lot of blood before I found her)....nope, no guarantees that we'll even make it through the day alive. So here's my motto I live by:

 

Life should not be a journey to the grave with the intention of arriving safely in an attractive well preserved mind and body, but rather to skid in sideways, cigar in one hand, martini in the other, mind and body thoroughly used up, totally worn out, and screaming "WOO HOO", what a ride! 

 

 

Permalink Reply by Joe Mag on May 17, 2011 at 1:37

Mainland Provides Operational Update on Pipeline Infrastructure
HOUSTON, May 17, 2011 /PRNewswire via COMTEX/ -- Mainland Resources, Inc., (the "Company") (MNLU-OTCBB, 5MN-Frankfurt) reports that it has received an initial report from SEI Energy LLC, which the Company retained to identify existing pipeline infrastructure in the immediate vicinity of the Company's Burkley-Phillips No. 1 well and to define the infrastructure as to capacity and availability. SEI also provided estimates on potential tie-in and transmission costs, and upgrade requirements as well as additional costs where applicable.

The contents of the report indicate pipeline infrastructure in place, which will require upgrading, which the Company anticipates will enable it to produce from the Burkley- Phillips No. 1 after completion and testing. Mainland expects to commence completion operations during the third quarter of 2011 and anticipates a timeline of three to five weeks.

Mike Newport, President and CEO of the Company, states, "Upon well completion, we will perform all the production and flow tests to determine flow rates and production capabilities of the well. This data will then assist in determining pipeline upgrades to the infrastructure identified in the SEI Energy report and assist in drilling locations of further development wells to be drilled."
SEI Energy is a wholesale energy merchant that specializes in Natural Gas, NGL and Crude Oil marketing and provides an array of energy consulting services tailored to meet the needs of independent producers. Mainland and its working interest partners control in excess of 17,800 net acres or 28 sections on the Buena Vista prospect area where the Burkley-Phillips #1well was drilled to 22,000 feet, cored and logged. Upon successful completion ofits proposed merger with American Exploration, Mainland would own 92% of the 28sections in the Buena Vista prospect. As recently announced, core analysis hasdetermined that gas in place in the Buena Vista prospect could be up to 500BCF/section based on the cored interval.

Permalink Reply by Bob Nies on May 12, 2011 at 6:46

The shake out is nearly complete.... the shorts will be covering from here until bottoms around .20 for MNLU and .05 for AEXP.

 

The believers have a great opportunity on the upside by averaging down if necessary, but if this is just a pump and dump, you can believe after the shakeout is complete they will run this up again prior to the completion attempt.

 

I'm on the conservative upside potential side (from what we know at this time) and would suggest a reasonable shot at $2 in MNLU (post merger and just prior to final testing). After that, the actual CAOF will tell the final story.

 

By the way a giant CO2 completion in the 2,000' zone could have great value in the local area for secondary and tertiary recovery processes for oil.... 

 

In the big pictures ALL oil and gas companies have peaked out this last two weeks as the commodity bubble is being pricked.

 

...just want to inject some optimism into the mix.

Permalink Reply by Joe Mag on May 12, 2011 at 7:26

I believe that the stock will run up to at least $1.50 when it is time in a few months. Just the hype alone will make that happen for sure. It would be a good time to purchase some stock to make some $$$$$. I personally would like to see the project take off and sky rocket and get some more natural resources going. Time will tell will be bottom line for all believers and naysayers.

 

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