Strategics and Upside In the last news release, you will see that Arc Resources will be drilling 2 more wells on the Bromhead. They stopped drilling on POP's and their own property after the completion of the first well due to some maintenance capacity issues regarding a battery that needed to be upgraded.
Now, Arc will be drilling with them get the 70/30 split. The last numbers we saw on the first well were about 110 barrels/day.
So, here is where things get very intriguing. There is always an IF in anything forecasting but let's say Arc averages 100 barrels/day from each of the two wells. I don't think that is a stretch. And with POP owning 30%, we would get credit for 60 barrels/day. People in the industry have told me that the value of a flowing barrel of oil is down to about $75,000. It used to be upwards of $100K.
So, 60 barrels X $75,000 puts POP's value of the two wells at $4.5 million. If you divide that by the 60 million outstanding shares, you have an increase of 7.5 cents per share. Based on a stock in the 20 cent area, that is huge upside on two measly wells.
On April 22nd, POP came out with a report highlighting 9 potential developmental wells that could be placed into a drilling fund. The forecasted numbers ranged from 97 barrels per day to 375 barrels per day. If you have any doubts about this, do your own due diligence. The report forecasted over 1500 barrels per day from these 9 wells.
The problem today is that every junior is negotiating from a point of weakness. The seniors know that the juniors don't have the cash to go at it alone, and the seniors are grinding out the best deal they can.
Prior to the resource meltdown, POP hoped to raise money in the $1-2 range and drill on their own and continue further drilling with cash flow. Those thoughts are long gone. It would be crazy to raise money, even if you could, at these prices.
To POP's credit, they have more than a million in the bank, cash flow positive, and are not diluting their shares. It is painfully slow but if they can continue to build up those barrels/day, they will do just fine.
Today the stock is trading on its cash and annual cash flow-that is it.
Going back to that report I mentioned, the 9 wells in discussion have the potential to have another 54 wells on those properties.
People aren't going to get wealthy over night, but we know this Company isn't going to dry up, and trading on its cash, I'll continue to add to it at these prices.
And finally, the other senior who bought J11 from POP is CanEra. Not a lot of info on this private company, but if you do some digging and see the principals, they are some of the most successful oil men in the patch. POP looked at this as a minor holding, and feel they made a decent return on a $30K investment.