Zion sent their lawyers to get us. It is like being flogged with Jericho lettuce. I drop one on them. They can’t psychologically handle it.

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!

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.)

The three letters that they sent me are reproduced here (1), (2) and (3). 

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.

 

John Hempton

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.

 

J

 

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.

 

*Apologies to the former Australian Prime Minister and the master of insult – Mr Paul Keating – and Company B.  The Paul Keating original is about being flogged with “warm lettuce”.

Whatever pleased the Lord, he did, in heaven and on earth, in the seas, and all the depths…

After considerable exchange with Zion's lawyers I have amended this post. The well is "probably" dry. For an explanation see this post.

For a small exploratory oil company with limited funds a dry well is really bad news. Three dusters and it is game over. Two and – well – you probably should be looking elsewhere.

And so I want to report to all that Zion Oil and Gas has had a probably dry well.

Zion is a special company drilling for oil in a special land. An alliance of fundamentalists Jews and fundamentalist Christians are fleecing their flock with a string of rights offerings to fund drilling in essentially non-prospective land in Israel. The company’s promotional dross is simply funny. This you-tube clip is simply a gem…

Zion however has reported the main well they were drilling to be dry. But – even funnier than the video is the press release announcing the bad news.

Enjoy.

25 September 2009 – Operations Update # 20

As noted last week, we have successfully drilled this well to a depth of approximately 17,913 feet (5,460 meters).

This past week, we ran a ‘velocity survey’ in order to help increase our understanding of the geology of our license area.

A ‘velocity survey’ is a type of seismic survey where the seismic travel time from the surface to a known depth is measured. Geophones are lowered into the wellbore and a pulse wave sent out from ground level; the resulting signals are then recorded.

The velocity survey data will be used to correlate specific formations to reflections seen on the seismic sections that we used to map the Ma’anit structure.

We have decided, for the present, not to drill any deeper in this well and are now analyzing and establishing the priorities of the seven zones that warrant completion testing. However, the well bore is in excellent condition and it is possible that we will drill this well deeper in the future. Next week, I will comment further, but I’ll mention that this week Zion’s Chairman, John Brown, gave me a note with the reference Psalm 135:6 – ‘Whatever pleased the Lord, he did, in heaven and on earth, in the seas, and all the depths…’

Politics makes people believe the strangest things – so let’s try make money from their stupidity

I knew I was stepping into heavily political ground when I wrote my impressions piece about Australian semi-socialised medicine.  Most responses (including emails) were reasonable – but some were so ideologically blinkered as to be perverse.

On the right there was much selective looking at data to argue that America does not produce (in aggregate) relatively poor health outcomes for the dollars spent.  You can pick individual conditions and show America is better-than or worse-than average.  But any reasonable overview of the American system will come to what I think is a non-exceptional conclusion. 

On the left there were several people who argued that pharmaceutical research done by capitalist drug companies was simply not important – citing the development of cosmetic and “me too” drugs and ignoring substantial research.  They argued real medicine is done by governments and universities – in other words good research is a socialist or semi-socialist activity.  That is simply blinkered.  One of my close friends – who has spent his adult lifetime doing cutting edge genetics research for profit (and who grew up under Chinese communism) simply responded that there are plenty of people who still believe communism is a good idea. 

Anyway one of the things that is patently obvious about America and its stock market (at least looking from Australia) is that it produces fantastically innovative companies.  American Capitalism gave us semi-conductor capital equipment producers, Google, the planes that enabled cheap commercial jet travel and mass marketed chewing gum.  More than a few of these involve some research.  Even the most cursory look at the product set of Amgen – a major drug company – would suggest that American capitalism funds some impressive drug research. 

Strange views like these exist in all countries – but the extent to which irrational right wing views are not controversial in the right and irrational left wing views are not controversial in the left is hardly a recommendation for America’s democracy.  (Americans call it polarization.)  The question is what are you going to believe: the prima-facie thing that is consistent with your ideology or your own lying eyes?

At the moment ideological belief that is inconsistent with reality is (far) more pervasive on the right as seemingly serious right wing politicians pander to Rush Limbaugh’s lack of nuance or to anti-scientific creeds such as creationism.  But it is not always going to be that way – and some of the responses to my post suggest that there is a latent left wing Limbaughism too.

But this is just tearing wings off butterflies.  There are plenty of stupid and/or ideologically blinkered people out there.  Pointing them out has about the same level of charm (and general interest) as making fun of “creation scientists”. 

I write an investment blog – and I have no reason to be interested in where commentators in the blogosphere are demonstrably wrong because they argue from their ideology rather than observable facts.  I have a really big interest – a money making interest – in where people are wrong in markets because they rationalize from ideology rather than observable facts.  These things happen – for many years market driven ideologues thought that the securitised mortgage market was fine because it was done by private sector participants (and it mostly dealt in mortgages that Fannie Mae and Freddie Mac were prohibited from dealing in).  They were wrong.  Anyone who hung out with a half dozen mortgage brokers and saw the trash they were underwriting could have (and should have) worked out that this was a disaster.  Ideology trumped facts on the ground.  And it gave some stupendous money making ideas.  People made hundreds of percent returns on their money shorting the AAA strips of CDO squared securitisations and other high-finance dross.  I know someone that made billions (yes billions) of dollars betting that subprime lending would end in a crisis – and they only had to risk tens of millions of dollars to make that money.  Stupid ideology gave huge profit potential. That stupid ideology came from the right because at the moment there is (much) more stupid ideology on the right – but again it was not always that way and will not always remain that way.

So – here I am begging my readers.  Much as I like reading about creationist astronomy and postmodernism and the Sokal Hoax and other people made stupid by their ideological blinkers - I would prefer find market sensitive stupidity.  If people can reply with ideas and the easily observable facts that prove them wrong I would be thrilled.  Emails acceptable.  But please no argument based on your ideology versus their ideology.  I am only interested in argument which is “their ideology versus readily testable fact” and then I am only interested if we can make money out of it.

 

John

PS.  Don’t mention Zion Oil and Gas.  I have already covered that one.

Creation Science, oil drilling, naked shorts and constitutionally protected stock fraud

I once – unfairly perhaps – questioned what passes as mainstream conservative thinking as anti-scientific. The real target was greenhouse gas denial where the debate has gone (a) the greenhouse effect is not real to (b) yes – it is but it not caused by humans and then it will go to (c) but we can’t do anything about it anyway. I figured (fairly) that if you deny the science you wind up getting counted out of the debate. The “conservative” line was a fast-track to irrelevancy.

The reason why my criticism was unfair was that I used “creation science”, a realm of pure science denial, as a club to beat conservatives with. And I was rightly pulled up.

However I had what was – in my view – a market test of whether creation science was garbage. And that was that there were plenty of oil companies spending cumulatively billions of dollars on oil exploration using methods of finding oil (eg fossils of seeds and weeds) that were consistent with evolution and inconsistent with creation science. However I could find nobody who spent even a few million drilling for oil based on creation science.

This blog however corrects its mistakes. There is a serious oil company that does drill based on biblical texts and creation science. I was plain wrong.

So I give you one of the promotional websites of an oil company (Zion Oil and Gas) with a market cap of about $100 million.

www.OilInIsrael.net

And – just because these things should not go to waste – I give you one of their many YouTube promotional videos. In that video they got to ring a stock exchange opening bell. Creation Science is – it seems – at the heart of American Capitalism.

This ungodly liberal with his own creation myth (evolution) stands corrected.

John

PS. Don’t bother looking – you can’t short the stock. There are no securities available to borrow – and naked short selling – that just isn’t allowed.

If you need to know who is behind this then Mother Jones started the work, and Richard Bartholomew nailed it. It turns out that it is promoted in religious publications by the well known preacher and Christian Zionist Hal Lindsey who does not dislcose his family's substantial holdings.

I will refrain from again making a case for naked shorting because I can't see any real social benefit in aggressive hedge fund managers sharing when Hal Lindsey fleeces his flock. We can keep the losses in the fundamentalist family without any major social detriment.

And on this - I pity the SEC. If the promoters hold the belief in oil in Israel as true religious belief it will be very hard for the SEC to go after them. Even if this is as transparent a scam as Mother Jones thinks it will be hard to prove. Did the Founding Fathers mean to constitutionally protect stock fraud?