Bulls and Bears
There's reason to be bullish and reason to be bearish on STP. I don't need to point out the reasons as to why I am bullish on STP. I have gone over these points ad nauseum over the past 3 months.
I'll now go over my bearish views.
In a nutshell, the company's actions have led me to believe that the ICDs are not performing up to snuff.
2P1
On March 17th, this well was testing in the 700-900 bbl/d range. It could not be sustained. During the CC, Mr. Lutes did say that it was being ramped up again, but his figures were purposely vague. One would figure that 6+ weeks was enough time to give us some solid numbers on this well but that was not the case. Where does it sit now? Unknown. On a sidenote, it struck me as rather odd that the monthly production for this well was ~600 bbl/d for the month of March. As of the first of the month, production was at roughly 700 bbl/d and higher for at least the next two weeks. To average out where they did, they must have throttled back production to 400 literally on the day of the news release. Coincidence? I would like to think so. Really I would.
1P5
Installation completed months ago. Lest people forget, this well had touched 150+ bbl/d earlier in 2013. The initial results post-ICD installation showed little to no improvement. What rate is this well producing at now, months after installation? Unknown. The last NR and CC would have been a great opportunity to give us an idea as to how this well has been performing. Management opted to stay mum.
2P5
The company is currently under a capex freeze, yet they have filed for an amendment with the AER to install an ICD on this well. Why opt for a new vendor? Why apply for only ONE well and not in pairs as they have done twice before? If the plan to install ICDs on 1P2 and 2P2 have been put on the back-burner, why issue this newest amendment so prematurely?
My point? Too many questions. We don't know what is going on at McKay. We kind of know that 2P1 is now producing at 600+, but that figure is just not good enough. We, the investors, need to know more. Can this well eventually hit 1000? What's the SOR? We know nothing. Yes, STP has 25+ years of reserves, and the ICDs proved that they could assist the ground team in extracting product from the ground.
Or have they?
Too much uncertainty. Too much cloak and dagger on behalf of management. Too much negative market sentiment. If the strategic review is extended as I think that it will be, it's going to be a long summer for the common shareholders. In my mind, based on what management has been feeding us, the first two ICD installation have been a middling success at best, and i'm afraid that that is not good enough.
With respect to TPTB calling the shots on 2P5 installation and waiting to see the results before moving forward with a deal, we shall see within the next couple of days as to whether or not my theory holds water.
-ShatnersRug