The business model of an offshore exploration company is to go out into the middle of the ocean and drill a well that costs over $100 million, with a success rate that is likely somewhere around 1-in-5. The prospect sizes are enormous, so if they hit oil chances are it is going to be a monster find. However, if they don't hit oil, you have just flushed $100 million down the toilet.
The business model of an exploration company obviously does not fit well with my investing style, which is based on Buffett. Exploration success equals a big win for investors, while exploration failure equals a big loss (all of the cash invested in the well). It is hard to invest in these companies and believe you are following Buffett's rule No. 1.