First off your numbers are wrong, if you want to talk about capital efficiency than you better have your numbers right.
Clarification on 2011 CAPEX. $225 million inlcuded $24 million Stimsol (CAPEX savings 500k/well), $13.3 million 13 sections land ($4000/ha), $187 million 35 wells drill/complete/tie-in/facilities.
Exit 2010 3000 boepd, exit 2011 forecast 6000 boepd, Arcan put together a fairly aggressive plan in action throughout the year with a couple hiccups that many companies in many areas across the province experienced.
Now there is not much of a point to compare MEL to ARN when MEL is a cardium producer and if you want to talk value take a few cardium peers and you will see an average range between $40,000-$50,000/flowing boe.
Arcan is valued higher per flowing and has been for a while, it is more comparable to light oil sask plays that trade +$70,000/flowing and it comes down to its a pure light oil play with large reserves and OOIP. Arcan established a dominant continuous land base in an unexplored oil play and have started to figure out what makes this play jive. The inventory is large and have wasted no time in putting together a waterflood plan. The play attracted some interest from CPG and they also wasted no time picking up a position. The story keeps these guys interested and the wells are repeatable with no shortage of land to put another 3000 boepd on the books.
All that said, Arcan isnt cheap but its one of the more interesting oil plays within AB. If management repeats the same success into 2012, cashflows at 6000 boepd will be close to $25 million a quarter which puts out a solid base for the growth to continue.
Here are a few specs to run through for interest, MEL has certianly proved to be a great company to own going from 3200 boepd to 5600 boepd in 2011. However, take a peek at their own debt and the remaining cash, tell me where their $100 million 2012 budget comes from? Raise cash and dip into debt, Arcan certainly timed that one right!
If you don't like it don't own it, easy.
Midway
- Production: 5600 boe/day (exit 2011)
- Product mix: 70/30 oil/gas
- Market Cap: $260 million
- Debt: $105 (year end 2011)
- Netback: $46/boe
- Reserves 2P: 16.7 mmboe
- $/flowing: 46,500/boe
- $/boe: $15.56
Arcan
-Production: 6000 boe/day (exit 2011) Arcan
- Product mix: 95/5 oil/gas
- Market Cap: $535 million
- Debt: $171 (year end 2012)
- Netback: $42/boe
- Reserves 2P: 35 mmboe
- $/flowing: 89,000/boe
- $/boe: $15.20