RE: RE: Back of the envelope calcs Lots of variables for sure. It's not a stretch for them to be doing $1.5mm/month in cash flow by next spring. So that would be $18mm/yr and would get let them drill a well under their own power every three months or so. As new wells come on, old ones are declining, so say that they'd be doing $24mm/yr in cash flow by the end of next year. Then they can drill 6 wells a year. And so on... it snowballs. The risks are mechanical, not geological. It's hard to know how to acount for that. The key is to prove up reserves. CLT's NAV is about $10/boe but corporately they are gassier than Kakwa. In an ideal scenario, Donnycreek would drill maybe 10-12 wells in the eastern section of their block before stepping westwards where they would need at least one well per section to book the reserves as 2P. Again, they'll be able to fund it all internally, so it just depends on how long it takes, but as you say, Donnycreek will likely never make it that long.
If someone paid $3 for Donnycreek in the spring on 30 million shares, would $90 million be a good purchase price? Well, at that point you'd have probably have proved up 4 of the 16 sections, or 2 net sections. CLT's numbers say there are 3.2-6.4 mmboe recoverable per section, so Donnycreek could have 6.4-12.8 mmboe net at that point, which would likely have a NAV in the $90mm range (mid-point) based on the $10/boe metric from CLT's reserves.
When Tourmaline bought Cinch back in 2011, they paid $200mm for way gassier assets. They assigned $40mm to the land value and bought 3,700 boepd of production and 13.5 mmboe of 2P reserves. Assuming $25 netbacks, they paid about 5x cash flow. They paid $12/boe of 2P reserves after adjusting for land value.
So what about Donnycreek? Say we get to 2,000 boepd and have 6.4 mmboe of 2P reserves. Well, 2,000 boepd at $30 netbacks is $22mm per year on cash flow (5x that would be $110mm). $12/boe on 9 mmboe (middle of range) is about $108mm. So the $90mm checks out.
TOU bought CNH as their lands overlapped quite a bit. A very similar situation has obviously developed here.
The longer we drill, the more we'll be worth. But you know what they say, you have to leave some on the table for the buyer. In a nutshell, I think $3 would get it done. But let's not put the cart before the horse. We need a good second well, followed by a couple more. Send those operations folks, completions crews, and drillers Christmas cards this year -- you want them happy!