It had to work.
Alas recently their (down-hole) tool failed and their stock dropped 35 percent. The stock has since drooped a little more. But it was - as the CEO pointed out - a promising well. They had approximately 200 feet of "net resistive sands" which my readers helpfully point out means sandstone with low electrical conductivity and hence possibly saturated with hydrocarbons.
But they did not get to test those sands (yet) and tool failure meant they could not test the well at its target depth (and they had to plug the lower part of the well).
The question arises though - why didn't they fix the well? Why didn't they do what "big oil" does when it has problems (that is throw money at them). The answer is that they do not have much cash.
The 10K just came out. The first thing I looked at was cash balances. Unescrowed cash was 9.9 million compared to 26.6 million a year ago. At the end of September cash was 15.1 million. Most of the well expense has probably been incurred after year end and the cash balance is almost certainly low single digit million.
Which is not what you want when your tool breaks and it is going to cost a lot of money to fix it. Or even a fair whack of money to test the "net resistive sands".
Still the company is straight about it. The auditor did not give them a "going concern statement" which surprised me. But the company disclosed the problems anyway. Here is the disclosure from the 10K.
While our development costs were funded during 2011 with funds on hand and cash flow from our other producing properties, our funds on hand at December 31, 2011 and anticipated cash flow from operations in 2012 are not sufficient to fund our 2012 drilling budget. Accordingly, unless we are able to secure additional financing or substantially increase our operating cash flow, we may be required to curtail our drilling plans. We do not presently have any commitments to provide additional financing to support our 2012 drilling budget. If we are unable to secure additional financing, we may be unable to meet certain contractual commitments regarding the development of our properties and, as a result, may incur penalties or risk losing some or all of our interest in properties for which we fail to satisfy our funding commitments.