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  • Bakken: Who's Got The Most Productive Wells? [View article]
    Hi ChuckXX,

    Thank you for reading and the kind word. I have not read the Barrons article that you mentioned but suspect it refers to the the shape of the futures curve - the curve is strongly backwardated and indeed prices future deliveries at a significant discount to current deliveries.

    I know it sounds trivial but I have to state the obvious - the futures curve does not reflect prices in the future, but rather prices today for future deliveries. Therefore, the futures curve often proves to be a poor predictor of prices in the future (predicting prices in the futures is simply not its primary function).

    So I think it is a bit dangerous to rely on the futures curve for forecasting purposes. Can oil prices decline to $75? Easy - as opposed to natural gas market, the price is set not by marginal economics but by OPEC's preparedness to take extra barrels off the market to maintain the price. Before that happens, Saudi Arabia and Kuwait must receive a credible pain signal.

    My bias is in the opposite direction, however, based on the world's demographics and very low percentage that energy nowadays accounts for in the world'd GDP.
    Apr 1 12:52 PM | 4 Likes Like |Link to Comment
  • Bakken: Who's Got The Most Productive Wells? [View article]
    Akinv1957,

    This is a very keen observation. In fact, MRO has reported strong improvements in drilling results as they transitioned to development drilling.
    Apr 1 12:40 PM | Likes Like |Link to Comment
  • Clayton Williams Energy: Asset Sale And Latest Well Results [View article]
    I might, but I would need to have a look.
    Mar 31 06:15 PM | Likes Like |Link to Comment
  • Clayton Williams Energy: Asset Sale And Latest Well Results [View article]
    Lindsaygdurham,

    Thank you and thank you for reading. On October 21, when I posted my first article on CWEI (was published as a TOP IDEA), the stock was still at $71.59. I agree, a nice 58% run in five months. It does get a little trickier from here, but the story has not fully played out yet.
    Mar 31 05:52 PM | Likes Like |Link to Comment
  • Comstock Resources - Oil And Gas Turnaround Play With A 40% Upside [View article]
    Drill Capital,
    Thank you for the article and for highlighting Comstock. Their story and valuation are indeed interesting.
    Your $30 price target sounds exciting. Just a word of caution. It appears your DCF valuation relies heavily on the assumption of sustained growth. Implicitly, this approach gives credit for assets that the company does not have yet. As you correctly stated, the company’s core asset in the Eagle Ford has a relatively short inventory life. Production from that asset will go in decline after full drill-out (your model suggests continued growth). I don’t think a DCF approach works well in this situation. A drill-out approach seems to be more appropriate.
    I would also be careful equating the Burleson County prospect to the well delineated, high-return development asset Comstock has in S Tx Eagle Ford. The expected economics for these two situations are drastically different at this point. Just my opinion, but it is a bit pre-mature to call the East Texas acreage a “recently Acquired East Eagle Ford Inventory.” It may become inventory once fully delineated and proven economic. Right now it is still acreage with one producing. This is not just an abstract concept. You are valuing the E Tx EF + TMS at $417 million, while the company paid less than $120 million for these two prospects (a winning bid in both cases) just a few months ago and has not drilled a single well yet. I wonder, what drives the instantaneous $300 million value gain? At minimum, I would think of this valuation as a range.
    Just my 2 cents, or whatever it’s worth : ).
    Again, thank you for the interesting, thought-provoking article.
    Regards,
    Richard
    Mar 29 01:50 AM | 5 Likes Like |Link to Comment
  • Halcón Resources: Latest Eagle Ford Results [View article]
    Jfsmart,

    I actually do have data on completion fluids for many Halcon's wells in my database but have not had a chance to review. Will have to get back with results at a later point.
    Mar 28 03:33 PM | 1 Like Like |Link to Comment
  • Halcón Resources: Latest Eagle Ford Results [View article]
    Vijoda,

    The only issue I see with the decline curve, there is always a risk to it given that projection histories are very short. I would refer you to my earlier posts on Halcon's wells for some very interesting raw production data.

    I will post another note with some additional observations on this topic over the weekend.
    Mar 28 03:13 PM | Likes Like |Link to Comment
  • Halcón Resources: Latest Eagle Ford Results [View article]
    Hi Drillbit Research,

    I believe you are correct on the Brollier #1 distance, thank you - I admit I eyeballed the map while I should have used the coordinates to measure the distance precisely. But the point is clear - the oil window transitions fairly quickly into wet gas window somewhere between the Stifflemire and Brollier, assuming of course that the two plays are correlated.

    With regard to the full-loaded costs, I certainly did not imply that HK somehow window-dresses its returns. It is just common practice to look at well-level economics and not to include some other cost categories. In fact, this approach makes sense since it better reflects the decision making process which is based on incremental well economics. What I tried to convey is the idea that a well-level return does not equate to a project-level return. For example, a 20% expected well-level return may be a "no go" for internal planning purposes, although in the ordinary world a 20% return may sound very attractive.
    Mar 28 03:06 PM | 1 Like Like |Link to Comment
  • Halcón Resources: Latest Eagle Ford Results [View article]
    Sailthesound,

    Thank you for the kind word and for sharing your own thoughts and insights in comments. Much appreciated.

    Regards,

    Richard
    Mar 28 02:55 PM | Likes Like |Link to Comment
  • Halcón Resources: Latest Eagle Ford Results [View article]
    Zegnus Deuce,

    Project level costs may include: seismic and other geo-science work; land acquisition, management and lease extension expenses; cost of "carry" on all investments that have not been converted to production; field G&A not captured at the well level; project-related portion of corporate G&A; unsuccessful delineation wells that are excluded from the calculation of the type curve; sub-optimal early-stage wells; some infrastructure costs (I must say Halcon seems to do a good job including well connection costs and some other cost categories in the IRR calculation). Many of these costs are sunk costs, of course.

    With regard to what output would make a well successful in this situation, I would say that I would want to see first-year cumulative production in the 110-120 Mbo range to feel comfortable that the project will make an attractive return. But this is just my personal "back of the envelope," not a well thought-out conclusion of a reserve engineer which is clearly needed here (and which is reflected in the companies' type curves).
    Mar 28 02:50 PM | Likes Like |Link to Comment
  • Halcón Resources: Latest Eagle Ford Results [View article]
    Jackthedog,

    I do think that HK's TMS acreage is very good and, arguably, has much greater resource potential per well than El Halcon. The issue is not there it appears - the TMS is very tricky from the execution standpoint.

    If you look at El Halcon, HK and the predecessor operator (Weber Energy) drilled ~50 well in a year and a half. If I exclude three wells outside the core area, essentially all the wells were successful and fall within a relatively narrow productivity range. They are not super-productive (not yet), but it seems one can count upon the result to a significant degree.

    Now let's look at the TMS over the past three years. Devon drilled several wells and exited. Encana still has not declared the play commercial. GDP has had the best track record of success but is not immune to mechanical issues either, as it turns out. EOG has drilled couple of wells, HK has drilled a well. Two dozen wells over a two-year period all taken together. Clearly, the play is a lot more challenging technically.

    Those technical issues are unlikely to go away completely, but may become better managed with time. I think the TMS is very promising, many operators recognize it. The acreage is very reasonably priced too. However, it is not a development play yet, while El Halcon has become one almost immediately.
    Mar 28 02:21 PM | 3 Likes Like |Link to Comment
  • Midstates Petroleum: CEO's Departure And Curious Math Of The Mississippian Lime [View article]
    Gretorahig,

    I actually agree on both points. Higher oil prices may make a difference for the Miss bringing it "in the money." Better wells may make a difference for the Miss (although, does it mean that the play will end up much smaller due to high grading of the acreage?). The latter factor has been somewhat elusive, however.

    I also agree that private equity and activists will need an exit mechanism and will do everything possible to accelerate the value maximization event. No question, this is good news.

    Here's a risk though. What if a less optimistic scenario materializes? What if there is no strategic buyer at any reasonable price? I actually can see private equity being patient investors. However, this is not a business model for activist hedge funds.
    Mar 28 02:02 PM | Likes Like |Link to Comment
  • Sanchez Energy: Stock Price Held Down By The Tuscaloosa [View article]
    Casey,

    Thank you for great thoughts and the article.

    Regards,

    Richard
    Mar 28 01:51 PM | Likes Like |Link to Comment
  • Sanchez Energy: Stock Price Held Down By The Tuscaloosa [View article]
    Casey,

    Thank you for the great article.

    Do you think the TSM, being a relatively small New Ventures initiative for SN, can really define the stock price? (At this time, capital commitment is still just the cost of the acreage plus one or two evaluation wells yet to be drilled.) Isn't the real issue the somewhat smallish "core" inventory in the Eagle Ford?

    You mention the Palmetto, which is indeed a top quality property, but how big is the Palmetto? In my understanding, only the southern portion of it is "prime" and the entire block is less than 10,000 acres (almost entirely non-op). You mention Wycross - isn't it just 3,800 net acres? Another great property, the Alexander Ranch, is approaching full drill-out.

    I am not sure the TMS is all that relevant - it defines only 5%-10% of the stock price at this point, IMO. If anything, it is a positive development as it is designed to address the "running room" challenge in the EF. I actually think establishing a toehold in the TMS was a logical move (although the price paid is a totally separate issue).

    I would actually look at the Marquis as the primary driver of the story (and La Salle County acreage, to a lesser degree).

    In terms of valuation, how does SN compare to PVA or CRZO (or CRK, I would add) on financial metrics? For some reason I thought SN was actually trading at a premium to all the three - in a way SN seems to be running ahead, not lagging.

    Again, thank you for raising very interesting topics.

    Regards,

    RZ
    Mar 27 05:08 PM | 2 Likes Like |Link to Comment
  • Midstates Petroleum: CEO's Departure And Curious Math Of The Mississippian Lime [View article]
    Gretorahig,

    Interesting point. May I just ask you though, who would be a logical buyer for SD or MPO? And what would be the rationale? Just as a thought, SD shows $2.8 billion PV-10 value of its existing production (that consolidates the trusts, in my understanding) while the Firm Value is $5.6 billion. A 30% premium to the current stock price would add another $1 billion to SD's Firm Value. Who would pay ~$4 billion for the company's undeveloped acreage?

    This is actually an interesting discussion point - welcome opinions.
    Mar 27 04:06 PM | Likes Like |Link to Comment
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