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The US Oil & Gas Scandal - More Urgent Questions

By Duck & Dive | Saturday 21 September 2013

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

More from the growing US Oil & Gas (USOP) scandal. The Eblana1 workover 2 daily reports have now been released by the Nevada Division of Minerals and they're a mystery. They can be seen here Apart from the fact that key daily reports seem to be missing (including the reports immediately after an alleged oil flow), the data we can see, and the timeline, just doesn't add up.

Senior NDOM official, Lowell Price, visited the site on FEB 27 and reported that there was no oil in the tank, no more than a trace of oil in the flotation tank and no sign at all of the 60bopd USOP had previously reported to them

And yet magically, USOP's daily report for the same day, FEB 27, claims: "Continuous light crude oil showed on the tank, along with some gas." Unfortunately, the reports for the following 2 days are missing from the archive. 

This alleged oil flow - unseen by the Nevada regulator - presumably provided the meat for the USOP RNS of MARCH 1, which must have been written immediately in order to be issued on the 1st - and yet there was somehow time to get laboratory analysis of the oil which allegedly flowed on FEB 27:

"In a 48-hour pump-assisted hydraulic swabbing and downhole pump test, one of the zones, found between 7,000 and 7200ft, produced a continuous flow of crude oil and water. Laboratory results have confirmed the crude oil from this zone is 28.5 API with a trace of contaminants and no hydrogen sulfide."

So was this oil sent offsite to a laboratory when the NDOM inspector called? Apparently not as no such explanation was given to Mr Price. The only explanation offered to Mr Price for the lack of evidence of the oil was that USOP's earlier reported 60bopd was only a calculation and not an actual, real-world flow.

Anyway, this is such a remarkable sequence of quick-fire events that it bears repetition:
1. NDOM arrive on site to find no oil in the tanks
2. The oil started flowing as soon as NDOM had left the site
3. The oil was analysed by the laboratory within hours
4. The USOP w/o2 RNS, including the lab results, was written immediately and transmitted within 24 hours.

As if this wasn't already incredible, the daily report archive also asks us to believe that the USOP w/o2 RNS on MARCH 1 was actually issued before the end of w/o2 testing, which is totally illogical as BM had previously made it clear that he would not report on any results until the end of the test. So why was the MARCH 1 RNS issued prematurely when there were apparently still 2/3 days of testing left? The daily well report for the following day, MARCH 2, claims:
"Light crude oil for the first 2 hours followed by heavy crude. Samples collected. More crude oil flowing."

Again, we are denied the report for MARCH 3 which might have shed some light on this.

So, mysteriously, all this oil suddenly appeared as soon as NDOM had left the site having found no proof of any oil flow. And unfathomably, USOP rushed out their w/2 RNS right away, before testing finished a few days later.

Will NDOM, or indeed any independent party, be able to confirm that this oil exists? Or could this just be a damage limitation exercise by USOP?

It has been said that NDOM were not happy that the Eblana1 well wasn't P&A'd sooner and accordingly bumped up the restoration bond for the latest permit to a punitive $100k. If true, that doesn't sound like NDOM are attributing any value to Eblana1. Of course, NDOM have also seen the w/o3 logs.

Hopefully NDOM will now issue a public statement. If not, will shareholders ever see the light and demand proof and clarity from the company -- including the whereabouts of the oil which they claim flowed for hours?

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