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Trading BKP: if you are early birds and want to bet..

Discussion in 'Shares' started by wdongli, 20th Jun, 2011.

  1. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
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    1,292
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    Perth
    If you are early birds into BKP and would like to bet on the shale oil, you need to understand the difference of conventional and unconventional oil and gas, since it would affect your mood, confidence, judgment, and decision greatly and affect the financial consequences for your betting.

    The followings are just some we need to know first in my view:

    How is this different to existing conventional oil and gas production?

    Shale gas (and oil) fields are different to conventional reservoirs in a number of ways and these differences need to be understood given that most investors in oil and gas companies are more familiar with the conventional E&P process.

    Key differentiating characteristics are as follow:

    The exploration and evaluation process.

    With conventional oil and gas exploration, success is often the binary result of a single well drilled into a prospect for the first time. A discovery is often readily apparent from the moment the drill bit hits the reservoir, from oil and gas shows in the rock cuttings, and if not contained, the reservoir will flow freely.

    A successful conventional oil or gas discovery will flow freely and during the exploration phase is demonstrated through the recovery of samples from down-hole tools, or flow rates to the surface.

    Shale gas exploration is completely different.

    Shale is common and finding it is very easy. However when shale rocks are drilled, they do not flow. In the first instance, estimating how much gas is trapped in the rock, requires a section of the rock to be brought to the surface, in the form of a core. The core is then sent to a specialized laboratory, where the amount of gas trapped in it is measured, and the mineral composition of the rock is determined. Measuring the gas volume is pretty obvious, understanding the mineralogy of the shale is equally important to understanding if it will fracture or not. Thus coring is typically the first step in evaluating a shale sequence.

    The next phase of shale gas evaluation is attempting to fracture the shale and see if gas can be liberated and flow to the surface.

    Initially it’s not critical that flow rates are high but rather the objective is to learn about how the shale responds to the frac – and not all shales are the same. During the evaluation phase, it’s likely that a number of wells are drilled, employing different completion and fracturing techniques, to see which works the best.

    It’s not critical that a complex and expensive horizontal be drilled – that comes later with commercial development. Thus the exploration and evaluation phase for shale tends to be a lot more evolutionary than for a conventional field, and this process is similar to the way coal seam gas fields have been explored.

    ***
    To bet on exploration results, we need the knowledge to know what would happen even we don't know how to make them happen; we need confidence and prudence in balance; we need to let the exploration come to the end for conclusion; and we could fail to run away without hurt if the results are not good or have not economical value.

    1. do you want to bet?

    2. how much do you want to risk if you lose all for your bet?

    3. the waiting time is quite long and usually it could last for a year as SSN and AZZ showed.

    4. the great thing is if BKP has the shale oil with economic value, it would make BKP and perhaps you!

    5. the worst thing is if the shale oil has no economic value, it would destroy all of the value in this shale!

    6. I have got about 1,8000,000 BKP shares.

    If it has the shale oil, BKP itself could double my capital.

    If it has not I would lose 10% of existing market cap of my portfolio. I have to say it is a huge loss but to me I have no other option. I know future could be worse but I am ready to be a part-time market player again and get a job for future chances. The sky will be still there and then I just need to be more flexible. After you make your decision, you need lucks and only lucks.

    Seriously saying I have got more than what I could image in 1992. Life is good since we have the chances.

    More thought in Wdongli's Blog