By Tom Winnifrith | Wednesday 19 October 2016
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.
Prompted by yesterday's bearcast, the conmen at Highlands Natural Resources (HNR) have released an update on the Laramie wells claiming success. But if you read closely...
What Highlands is endeavouring to do on this test well programme is to establish whether DT Ultravert technology can deal with a phenomena known as "bashing" which is when the drilling of a new fracking well damages productivity at an old one. The company claims that it drilled away and there was no damage done to the parent so this is a success. Except that not all fields suffer from "bashing" and the extent of bashing varies from well to well. So it could have drilled without the DT Ultravert Technology and gor the same results.
Perhaps that is why the release is phrased in such an odd manner. Highlands says that
These initial tests answer three key questions: Firstly, that DT Ultravert can achieve significant and sustained down-hole pressure that effectively diverts fluids from depleted areas of the reservoir. Secondly, that DT Ultravert can prevent well bashing. Thirdly, that the application of DT Ultravert can enhance the stimulation of child wells and improve production performance.
Shouldn't it say does not can?
This is just the first test. Any type of completion could have avoided bashing as 1000's of different wells are drilled in the US each year and most cause no bashing. In other words this proves little.
Moreover, reading around the subject I see that there are already existing ways of dealing with bashing. I quote the respected publication Upstream writing this summer:
Performing protective refracturing operations on the delineation wellbore. Over the last two years, this process has demonstrated promise as an effective and economic solution to the well-bashing phenomenon.
Whatever, Highlands will use any share price strength caused by this meaningless news to get more warrants exercised with mug punters picking up the resultant (forward sold) stock.
The shares are up to 34p. With an effective "in price" for the spiv who can exercise warrants of 26p, the shares will tumble as soon as the forward selling starts. i.e. very soon indeed.
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