Oh no! Zion sent their Lawyers to get us.
It's like being flogged with Jericho lettuce!
The Feral Fundamentalists have
Come to savage us!
They must be ravenous!
Meddling Mediocrity, from the Televangelist Aristocracy,
Rip off merchants from Hal Lindsey Ministries,
But Old Dozy knows when I've got 'em,
They fail to reply when I drop one on 'em.
It's somethin' they can't psychologically handle.
Them and their band of shareholder wealth vandals.*
Last week I had an exchange with Zion Oil and Gas’s lawyers. Zion it seems objected to my characterisation of the Ma’anit-Rehoboth #2 Well as dry. They accused me of deliberately misinforming the market and of stock manipulation. They threatened to report me to regulators.
I asked whether the well did show hydrocarbon flows – and if so how much? After all they have been up and down this well with equipment many times and if there were hydrocarbons they would detect gas in those trips (so-called “trip gas”). Eventually they said through their lawyers that they had found hydrocarbons in this well. (Note that their position appears to have changed since early this week – as this weeks drilling report denies the finding of hydrocarbons.)
Zion are currently issuing shares under a rights issue. Selectively informing me of a hydrocarbon find is of course an offense. Not informing the market of such a find during a rights issue is similarly an offence. Likewise would be failing to inform the market that the well was substantially dry. Whatever, I agreed with them the regulators should be informed. They had been keen to turn me in. So I sent them this reply:
Dear David [Aboudi – Zion’s lawyer in Israel]
It is clear that you are intending to report me to the regulatory authorities for my blog post on Zion oil and gas.
I think we should proceed quickly. I have copied this letter to Stephen J. Korotash---Associate Regional Director of the SEC office in Fort Worth in charge of enforcement. This is the appropriate regional office with jurisdiction over Zion. I have previously copied him all three of your emails to me and my blog post.
Could you suggest a time that is appropriate for a conference call?
I have not invited Tim Johnson who is the US Attorney for South Texas which has venue over Houston based issuers, however if you wish to include him his email is [withheld]@usdoj.gov
I look forward to our discussion.
Thanks in advance.
I have heard nothing more from them.
They drill for oil in the Promised Land. I sit at the arse-end of the earth. But good religious folk like them should know it is rude not to reply.
I am waiting for the next warm Jericho lettuce flogging.
PS. I send a draft of this post to company for comment. They have since made much clearer statements as to the hydrocarbons in this well. They are testing zones of porousity so they still have hope – but they note that:
As yet, no hydrocarbons have been ‘Produced to Surface’…
[However] with regard to our log analysis, an independent log analyst noted that the Ma’anit-Rehoboth #2 well does have a specified amount of potential “net pay”…
The analyst was careful to comment that the results of his analysis … should not be considered ‘quantitative’ due to the effects of borehole washouts on the input logging measurements used for his analysis.
He noted that the existence of any hydrocarbon-bearing, open-hole fracture porosity in the formations inferred from the effects of borehole washout on the conventional wireline log data analyzed was tenuous at best, as such reservoir properties are impossible to identify or quantify directly from conventional log data alone.
The analyst recommended testing the seven zones…
You will appreciate that, until such time as we recover hydrocarbons at the surface (or not), we are not able to give any estimates of what (if anything) we believe we may recover.
Given no hydrocarbons have been produced to the surface and the indications are tenuous at best I will now amend my original post to the well being probably dry. Their legal threats demanding I withdraw the assertion the well was dry seem hollow.
Moreover their lawyer in a letter to me (and copied to the Zion’s CEO) said:
Our client has clearly indicated in its public filings relating to the Ma’anit-Rehoboth #2 well that the well logs indicate the presence of hydrocarbons in identified 'zones of interest'.
There is an inconsistency between Zion’s latest statement to the market and their lawyers statements to me. That was a sustained exchange so the disclosure to me was not an accident. However Zion’s comments during the rights period now appear to be appropriate – I think in no small measure due to this blog.
PPS. Zion are Dallas (not Houston) based. The right USDOJ official would be James Jacks. That is good – he is probably more aggressive than Tim.