Regardless of Elk/Antelope nearby, the probability of success (POS) for our exploration wells is 1 in 10 or 2 in 10. As IOC has not recently published POS to my knowledge, I wouldn't think they were higher than these historic worldwide success rates based on 2D seismic.
That means we have an 80% to 90% chance of failure.
For those who say we're drilling 3 or more exploration wells and our POS is higher - fortunately this is the case. If each well is totally independent and we don't learn anything much from any well, the POS is exactly the same for each well - 10% or 20% - however, if we roll the die 3 times (if we drill 3 wells.) we increase the chance we'll have a success. The probability of, say, a 6 in one of three rolls of the dice is 1-(5/6)^3 = 42.1%. (I'm using 1/6 as the probability of success as this is about 16% and roughly midway between our 10-20% POS.)
Of course, I'm hopeful we'll learn something (better seismic calibration, geologic model update, etc) which might allow us to improve well 2 or well 3 POS. Unfortunately, since we're drilling back-to-back and it takes a few months to identify and build a location in the area, we may not have much improvement in POS on wells 2 and 3.
When talking about IPI wanting to stay in for the exploration wells, one needs to consider the high chance of failure of those exploration wells. I am sure the IPI guys are.
Just wanted to interject engineering/geologic reality into this discussion. G&G folks feel free to comment/correct my comments above - I'm an engineer after all!
And having said that, I'm hopeful that well 1 is a big success. I am, however, considering how best to protect my long position with puts in the case its a failiure. I wish I'd done that prior to the deal announcement.
On a related point, I'm troubled that MH said IPI done in January, and here its Feb 12th and nothing. OTOH, I'm glad he has not put another deadline on getting IPI done - not a good negotiating play to box yourself in.
GLTAL
