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Richard Zeits  

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  • SandRidge Energy: Waiting On Steps To Repair The Balance Sheet [View article]
    Fliper2058,

    The trick is that there are $3.2 billion in bonds to be exchanged. 1bn in new shares is only $496 million, using Friday's closing price. You are making an excellent point, actually - there are many things that need to happen logistically and legally.

    Again, I am surprised that it is August and nothing has transpired. Things looked a lot better when stock was trading at $1.50 few months ago.
    Aug 8, 2015. 04:49 PM | 1 Like Like |Link to Comment
  • SandRidge Energy: Waiting On Steps To Repair The Balance Sheet [View article]
    Fliper2058,

    I guess there are two alternatives:

    - First, the balance sheet is beyond repair - there is no reason to take any steps, just hope for a $90 WTI that would reprice assets and re-open alternatives; the price of waiting is $350 mm per year in interest expense and shrinking production (or shrinking liquidity);

    - Second alternative (which would required some willpower) - to offer sub. bondholders an exchange for stock, cash and new bonds, let's say $1 face value of old bonds for a combination of $0.15 in cash, $0.15 in third lien bonds and $0.70 in stock (priced at, let's say, $1 per share). The parameters would obviously need to be tuned to make sure that sub. bondholders are better off taking the deal than holding out. The offer would need to fit wihin the sub. indenture. A consent would probably be needed from senior bondholders for some balance sheet cash to be used as consideration (let's say, in the amount of interest that would be saved over the first two years). Etc. Emerge with $1.6-$1.7 billion senior debt and possibly some hold-out sub debt and a decent amount of cash. For shareholders - strong dilution, but some viability and even option on a spike in oil prices. No guarantee this alternative will work at this point but it is surprising it was not put forward immediately after the second lien offering.
    Aug 8, 2015. 03:48 PM | 1 Like Like |Link to Comment
  • SandRidge Energy: Waiting On Steps To Repair The Balance Sheet [View article]
    Pablomike,

    I would be surprised if the $375 mm estimate was not substantiated, in some way. Please note that this is a D&C number that implies 55-60 laterals added per quarter. However, I find it of little help as it is not clear what time frame is being used for that estimate; what non-D&C capital requirements are associated with it; etc.

    The company was spending $1.6 billion a year ago and was growing at what I would characterize as moderate growth rate (~25% p.a.).

    The $375 mm figure sounds quite a bit aggressive and does not seem to provide the answer to the cash flow break-even question that analysts are interested to get an answer to.
    Aug 8, 2015. 01:58 PM | Likes Like |Link to Comment
  • SandRidge Energy: Waiting On Steps To Repair The Balance Sheet [View article]
    DeepValueLover,

    I would use cash-based metrics to evaluate returns and leverage (such as Debt/PDP PV-10; Well-level drilling return; Free Cash Flow above maintenance capital / Equity Value; etc.). Historical book values can be very misleading as asset valuations in this industry are a moving target.
    Aug 8, 2015. 01:52 PM | 4 Likes Like |Link to Comment
  • Exxon Mobil: It's All About Free Cash Flow [View article]
    Gary,

    Indeed, a massive amount of issuance in the sector both on the equity and debt side. A lot of bank debt refinancings. Even the Oil Majors are accessing capital in significant amounts.

    Good news, capital still available (at a price). Bad news, the industry's capital structure turned out inadequate for the low-price commodity environment. Generally speaking, way too much debt. For majors, future capital commitments are liabilities that are often overlooked.
    Aug 8, 2015. 11:15 AM | Likes Like |Link to Comment
  • EQT Corp.: The Dry Gas Utica Is A Diamond - No Longer In The Rough And, As It Turns Out, As Big As The Ritz [View article]
    Chenhomberge,

    Antero and EQT would be examples of operators with significant FT portfolios. "In the money" is a very tricky concept, however. Given the tremendous incentive, takeaway has a good chance of ending up overbuild with time. In that case, "in the money" may quickly become "out of the money."

    Specific transport routes also matter quite a bit.
    Aug 5, 2015. 09:07 PM | Likes Like |Link to Comment
  • Cabot Oil & Gas: How To Escape The Gas-On-Gas Competition? [View article]
    A Farmer,

    What is your definition of "meat?"
    Jul 28, 2015. 10:53 AM | Likes Like |Link to Comment
  • Cabot Oil & Gas: How To Escape The Gas-On-Gas Competition? [View article]
    A Farmer,

    I agree, this back-of-the-envelope approach should work everywhere. We just need to use quality estimates and check against reported data.

    To use your SD analysis as example, what is SD's capex this year? How many wells will it have completed? What is the production trajectory?
    Jul 28, 2015. 10:35 AM | Likes Like |Link to Comment
  • Cabot Oil & Gas: How To Escape The Gas-On-Gas Competition? [View article]
    A Farmer,

    Let's do the following math.

    At 2 Bcf/d gross, Cabot is producing out ~0.73 Tcf of reserves per year. How many wells does one need to fully replace the produced reserves?

    At 10 Bcf per well (EUR), that would be 73 wells. At 20 Bcf per well, it would be 36.5 wells.

    Let's use capex of $7 million per well ($6 million D&C and $1 million production facilities).

    Using 73 wells, total capex would be $500 million, give or take. Using 36.5 wells, total capex is $250 million.

    In other words, in the long run, PDP reserves can be sustained at a constant level within the $250-$500 million annual capex range.

    To sustain production flat, one needs to run a more complex model, but I think $400 would be sufficient currently and will drift lower over time.

    Again, Susquehanna is different from many other areas. In the Haynesville, it takes $8 million to drill an 8 Bcf well and facilities, for example (in the best areas). Doing quick math, it would take ~$720 million in capex to replace produced volumes in the Haynesvill, assuming an average of 2 Bcf/d gross.

    Sussquehanna Marcellus would be an incredible cash machine if not the price realization situation that I discussed in the article. And the reason why Marcellus North has gotten itself in this pricing dead end is that it's so productive.
    Jul 28, 2015. 08:52 AM | 2 Likes Like |Link to Comment
  • EQT Corp.: The Dry Gas Utica Is A Diamond - No Longer In The Rough And, As It Turns Out, As Big As The Ritz [View article]
    Phaedrus1952,

    Thank you for the data points on Sportsman's, most helpful. Indeed looks a bit steep for a well that one would expect to be pressure-managed. Let's see what RRC is going to say on their conf call.

    Susquehanna Utica - interesting. Thank you for the color.
    Jul 27, 2015. 04:08 PM | Likes Like |Link to Comment
  • EQT Corp.: The Dry Gas Utica Is A Diamond - No Longer In The Rough And, As It Turns Out, As Big As The Ritz [View article]
    Phaedrus1952,

    The reason Devonian plays are on the back burner and therefore are not getting much attention is they often cannot compete with more prolific Marcellus wells. Lease retention considerations may also play a role.

    Indeed, there is a lot of gas in those formations and at a certain price they can be commercial. The most economic locations will be developed first, however.
    Jul 27, 2015. 12:59 PM | 2 Likes Like |Link to Comment
  • EQT Corp.: The Dry Gas Utica Is A Diamond - No Longer In The Rough And, As It Turns Out, As Big As The Ritz [View article]
    Stag15,

    I am not sure I agree with "The permeability of these reservoirs falls off exponentially as depth increases." It is really reservoir-specific.

    I agree on cost, but it should be taken in the context of the payout period.

    With regard to Range, the well has been on a managed pressure program, in my understanding. I have not heard that it has declined. Have you? Would appreciate any insight.
    Jul 27, 2015. 10:30 AM | Likes Like |Link to Comment
  • EQT Corp.: The Dry Gas Utica Is A Diamond - No Longer In The Rough And, As It Turns Out, As Big As The Ritz [View article]
    Stag15,

    All very fair points. However, I would refer you to Rice's Bigfoot #9H to give an idea of what the high end of expectation might be here.

    Obviously, one needs to see what the rate of pressure drawdown is going to be in the deep Utica. But the starting point is much higher than it is in Belmont County. So if one could drill scaled-up versions of the Bigfoot on a consistent basis for $12-$15 million a well, you've got yourself a play. A Superplay, in fact.

    The Deep Utica is a "decade into the future" type asset. Let's not forget that the Marcellus will leave very big shoes for others to fill once its sweet spots begin maturing. There will be a lot of takeaway capacity in place at that point. Once capacity utilization begins to decline, transportation will reprice and the economics for a play like the Deep Utica will look very differently.

    The really interesting question, in my mind, is how far east does the play extend and can be realistically produced. Graphs show some nice porosities going downdip.
    Jul 26, 2015. 12:40 PM | 2 Likes Like |Link to Comment
  • Exxon Mobil: It's All About Free Cash Flow [View article]
    giofls,

    No need to wait for 50 years :) - I would actually disagree with:

    "The long-term theoretical economics tell us that the minimum sustainable price for oil is the cost + reasonable ROI for the last marginal producer needed to meet demand."

    Nothing suggests that marginal producers have to receive reasonable ROI. In the market environment, marginal producers are collateral in the battle called competition. Marginal producers may or may not receive positive ROI.
    Jul 25, 2015. 07:14 PM | 3 Likes Like |Link to Comment
  • EQT Corp.: The Dry Gas Utica Is A Diamond - No Longer In The Rough And, As It Turns Out, As Big As The Ritz [View article]
    Pablomike,

    Certainly not the most expensive - there have been many expensive wells out there.

    I like Fracjob's "pressurized bomb" analogy. Not easy to execute smoothly.

    But once there is one that works, there should be more. I can see costs coming down.
    Jul 25, 2015. 06:30 PM | Likes Like |Link to Comment
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