Braden Holt

Braden Holt
Contributor since: 2012
Those well cards were pulled from thewellmap.com. The data is sourced from the Oklahoma Tax Commission which is sourced above twice.
This article was written using data on approximately 290 wells SandRidge had drilled in the Lime prior to 2013. It does not include Kansas wells which is something that should have been more clear.
If you want to talk about The Well Map, you can message me separately.
Right, but the oldest horizontal wells in the Lime are only three years old, so we're using the best data that's available at present. There's not many horizontal oil plays with five years of production data.
That's another possibility. Thanks Pudentane
Just because it's a more difficult area to operate, doesn't mean companies shouldn't continue trying to innovate. And when they have good results, they're interesting to talk about. Maybe nothing will come of this, maybe it will become the optimum method of operating low pressure carbonate systems.
Either way, just because it has always been hit or miss, doesn't mean that will always be the case.
That's the figure they're using as their average cost per vertical well, so I'm relying on the company for that information. If I was a betting man, I'd guess they got done for close to that figure, but I haven't seen an AFE or asked them about it.
The IRRs, EURs and well cost figures in the piece above were obtained from the companies themselves. This article was written on September 17, 2012 and since that date SandRidge has revised its IRRs significantly as its wells haven't met company expectations. I'll admit it was a mistake of mine to rely on company data.
As for your modeling issue, they're assuming the lifespan of the well is 120 months or 10 years, so that may be the difference.
I defined it as an asset that will provide long-term growth.
Ok Chapter 11. Hopefully my point was still clear.
Their Bakken acreage isn't going to payback for 4 + years and I haven't seen one well in Goshen County, WY that worked. I like the Niobrara, but even the acreage that works there (Wattenberg excluded) isn't more than an ancillary piece for a company (see EOG's Heresford Ranch or CRZO).
I wouldn't touch GMXR with a 10 foot pole. Chapter 9 is looming.
I wrote this piece: http://bit.ly/YUcpHF before SD sold its Permian. I believe I posted it to SA so you must have missed it. Devon Shire from SA wrote a good article a couple weeks after mine was published concerning SD's returns: http://seekingalpha.co... . Full disclosure, I dumped SD at ~$7.30 a couple weeks ago and have no plans to re-enter.
James,
I appreciate the comments and will look for that article. This piece wasn't a valuation, it was a drill down in to their asset base. I made note that the company has a low valuation, but no where did I talk about what it's true value might be. Oil and gas exploration is a risky endeavor, so I look at companies I'm looking for a path to long-term growth.
According to the Texas Railroad Commission the well was completed on March 6, 2012 and produced 21,410 barrels of liquids and 4,852 Mcf of natural gas during March. I assumed the well produced 25 days during the month of March and if you crunch those numbers you will get 889. During April, the well produced slightly more oil and more than triple the amount of gas.
It's possible these wells produced for less than 30 days during those months which, if the well fell off, could explain the difference. I calculate my own data based off of publicly available data and because the State of Texas doesn't give days a well produced in a month, I have to make some assumptions. Usually, I'm pretty close. I should have footnoted the data
Their valuation is certainly low, but after taking a close look at their assets I didn't see anything that's going to give them say, ten years of growth and that speaks to their low multiples. I don't think that's a bad thing as companies don't need to start out with 90k acres in the Eagle Ford to be successful, I was just highlighting that point. It's easy for investors to look at their presentation and see 23k in the Bakken and 7k in the Eagle Ford and wonder why this company trades so low. I believe my article explains why that is. I am open to being wrong though.
Thanks for the comment. The company is actually underfunded and highly levered, so they sold the Permian to fund the development of the Mississippian.
The company made some early assumptions about the play that were incorrect. Now that they've got two years of production history on some of their earlier wells and have seen huge declines on their bigger wells, they've decided to revise those assumptions down based on that data. It bothers me that their well performance in the Mississippian hasn't gotten any better over time (you'd like to see an upward trajectory as the company figures out the science). With that said, it's interesting that both SD and RRC are looking to make this play their focus from an oil standpoint. RRC's early results have been strong and new thinking points to the Nemaha Ridge as the play's sweet spot. It's clear there's a lot of oil in the Miss, so maybe the science/thinking has to catch up a bit.
Kansas reports at a lease level, but the wells on I included in this report only have one well on the lease. As I said before, Oklahoma doesn't report oil production (they do report gas production) but the data is available on purchaser reports. Outside of those two, some report by lease, some by well. Texas reports by well for gas and by lease for oil. North Dakota and Colorado both report by well.
I'm not arguing with you, I'm just making sure the readers of this article don't leave thinking you're doing anything here but trying to obscure facts.
Well then as you know, the data comes from purchaser reports that the OCC has searchable on their website. So if you think the data is bad, then you're basically saying the purchaser (ie: Phillips 66) is lying about how much oil they're purchasing from a given company.

Thanks Moby. The Eagle Ford also has a lot of gas and liquids and some people think it's the best play on the planet. I'm not putting the Mississippian in that category, but I do think it's economic and there does seem to be a lot of oil there as evidenced by some of the bigger wells. It's an intriguing stock because its reserves are trading at the levels of a natural gas company and half of those reserves are oil. With that said, I'd be lying if I didn't ask myself that same question sometimes.
The OCC doesn't track oil production, so your comment about their data being "suspicious" doesn't make much sense. As for these "auditors" you talked to, I guess we'll find out when SD's 2012 reserve report comes out.
My gut reaction is yes for the reason you stated. They have tier 2 assets that will produce a lot of oil for the owner. But if you look at the company's metrics, they just don't stack up. I'm torn on SandRidge...I don't think I'd be selling them now, but if I was buying there's probably better opportunities out there.
I know they drilled a handful of wells in Garfield last year, but I haven't looked at the results. A cursory check shows similar to Grant, but it's a small sample size. It looks like they have a lot of leasehold there so I would expect them to get to it soon.
You're welcome. If he still intends to sell the Permian, my personal opinion is that he should be ousted. With that said, I would buy/sell the stock assuming he stays on.
Today they might, but again there's only ever been ~20 wells completed in the TMS in history, so there's a lot for companies to learn and hopefully plenty of room for costs to come down. If this is as low as costs go, then the play might not work, but I doubt that's the case.
Hah yea I wrote that article/that's my blog.
They've been drilling the best Eagle Ford wells in my opinion. The declines on some of their Karnes County wells resemble the Parshall field and Live Oak looks great too. Anyone know if they've started drilling Lavaca yet?
If you're buying or holding GDP you're really betting on the TMS as that's going to be the major catalyst for the company moving forward. They absolutely need to find a JV partner for their 150k acres there as they don't have the liquidity to develop it on their own. Evidence of this is that S&P just downgraded their credit rating because the company hasn't been able to generate cash flow. I look at it like this: there's better options.
The "screw EOG" comment may not have come off the way I intended it to. What I was trying to say is that EOG is a fantastic company who gets a lot of coverage, let's look at a much less sexy company to see if we can find some value.
I agree that financing is an unfortunate distraction for some of these small caps, particularly KOG. It will be interesting to see how they manage their spending moving forward. If they believe in the long-term fundamentals of the price of oil they don't need to overextend themselves because the oil itself isn't going anywhere.
Thanks Mike.
On the other side of the equation: If I did have a position in Whiting and I was telling you to buy them subsequently, couldn't that be mistaken as a conflict of interest?
My research and analysis should speak for itself. I'm not here to make decisions for you, I'm here to provide information and analysis. I don't run a hedge fund. I don't pump stocks. I look at various stocks for various reasons and write about them. Might I enter Whiting at some point? Sure. Do I plan to in the next 72 hours? No.
I don't disagree with what you've said, they're certainly not at the stage where they need to be spending within cash flows but they've been very dilutive (as many shares outstanding as EOG) and have issued a moderate amount of debt to get to this point. I know you can buy back shares and retire debt, but they're a long ways from being able to do that. KOG is still a buy for me at this valuation, but it's not without risks. People forget how cyclical oil prices can be, particularly when you consider the systemic risk in the market today.
Good point, there's definitely analysis to be done there. If you're curious, an easy way to get some preliminary data would be to dig through presentations of Lime companies and look at the upside price decks on their type curves.