It’s not a surprise. We are very close to getting results from Elk4, an appraisal well drilled close to what is the greatest natural gas gusher (Elk1, the discovery well IOC drilled two years ago) in Papua New Guinnea (PNG) and even Australia. The early signs looked promising.

There is a possible reef structure (which has the highest porosity and permeability, making sure that there is a lost of gas and that it flows easily). There was also a higher amount of background gas than even at Elk1.

However promising the location of Elk4 and those early signs might be, only a drill stem test (DST) can be definitive. A DST test lines the wall with cement, then a gun is lowered which shoots little holes in the cement, and the ensuing gas flow is measured.

Until those final results are in, we expect IOC to drift upwards. Some shorters will get nervous. The chance of confirming the deliverability of the gas at Elk is very substantial (we think it’s like 80-90%), and there is even a chance of an oil find.

An oil find would explode the stock price, as IOC has a refinery in which that oil can be used almost overnight, boosting cash-flow instantly.

We don’t think the shorters sleep well at night, but let’s see whether we can pass that 50 day moving average first, we’re very close, it’s at 20.50 or so.

We’ve just taken out the high of yesterday, it all looks pretty good.