William,
Some comments:
- Your premise for selling (PP2) is faulty for at least two reasons. Buying or selling on hypothetical averages is bad business. You lose the good deals and get the bad deals on both sides. And shale developments by horizontal drilling and fracing of known deposits (a mining economic) has altered the proven reserve calculation and discount tremendously. Buyers are taking advantage of the lack of understanding of the owners.
- Investing in proven and probable reserves in the ground involves natural laws of physics and supply and demand economic projections, while investing in an E&P company adds the higher risk of regulatory laws and business plan management capabilities to realize the benefits of both finding and producing reserves by their economic definitions.
- The investor’s risk aversity is key in your apples and oranges comparison.
- Most important to selling is opportunity cost of holding. Can the seller better utilize the fair sale proceeds under his control than risk the promise of long-term income? To each his own. There is no secret formula.