WTL->MOX

Position in West Energy(WTL) sold, capital partly redeployed into Midnight Oil Exploration(MOX). MOX is very poorly managed, but it may have upside potential in two factors. One is that it could be used through a reverse takeover as a corporate conversion vehicle by Daylight Resources. The companies share some assets and history and the CEO of Daylight(Lambert) is a director in MOX. The market has already seen one conversion where a trust takes over that very same explore co. that was created in its formation(Progress Energy Trust &ProEx). The premium in a Daylight takeover would probably be very modest, max.25%.
Taxpools, operational synergies and a modest valuation raise MOX as the front runner for DAY.UN's conversion vehicle. Daylight intends to convert during this summer so it shouldn't take more than three months to find out whether DAY has any plans involving MOX.
Risks related to this scenario: No takeover, takeover at a price that is lower than my entry price.

The other potential source of upside is much more speculative. It' appears that the combination of horizontal drilling and multi stage hydraulic fracturing is unlocking value in not only tight(low permeability) shale and sand reservoirs, but also in low or mixed porosity carbonate reservoirs such as the outer limits of Swan Hills BHL carbonate and possibly in the Slave Point carbonate of Otter and Red Earth. MOX has a land position of 45 000 acres in Red Earth and the well licensed by PWT.UN in January very near MOX's land(if not on MOX's working interest land) would seem to indicate that some incremental value might be unlocked at the Red Earth property.
How much is "some"? If the stabilized production of around 50 bbls per well mentioned by Penn West turns out to be true one could expect the reserves per well to be in excess of 200 000k.
Risks: no or very little Slave Point potential on MOX's land, the management sells property without realizing it's potential.