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Do As I Say, Not As I Do At Credo Petroleum

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The Company: Credo Petroleum, which despite its name is a natural-gas exploration company.

  • The Filing: Credo's latest Form 10-Q, its earnings report for the quarter ended April 30.
  • The Finding: The onshore U.S. driller reported that natural gas production over the past six months fell 19 percent from last year's record of 1.02 billion cubic feet. Credo is currently experiencing delays in securing drilling rigs and production equipment, primarily compressors and coil tubing. These delays are extending the time it takes the company to replace reserves.
  • The Gist: Management's strategy to build out reserves focuses on successful execution of two complementary initiatives: The application of its Calliope Gas Recovery System to its own depleted wells and licensing of the recovery technology to third parties, and diversifying into new drilling projects such as a major initiative in South Texas.

    In South Texas, Credo owns an 11 percent stake in the high risk but high potential Gemini Prospect. Credo chairman and CEO James T. Huffman says 3-D seismic interpretations suggest that gross reserves in the area might amount to hundreds of billions of cubic feet of gas. Huffman believes the size of the Gemini Prospect, coupled with the Calliope Gas Recovery platform, could have an enormous positive impact on Credo's production and reserve growth.

    At a depth of 17,000 feet, Gemini is a very high cost, rank wildcat drilling prospect.

    Question: Might that explain why on June 3 Huffman recently sold 425,000 shares, or about 40 percent of the Credo stock he and his family held, to the private-investment group RCH Energy Opportunity Fund?

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