GREY:STPJF - Post by User
Comment by
Eyeinvestoron Jun 17, 2014 5:44pm
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Post# 22668620
RE:RE:RE:NR
RE:RE:RE:NR
You will recall that Eye forecast the Pad 102 infill drilling and additional well pads was the best route for the company 3 months ago.
Then when they announced the $150 million financing eye thought they would spend $10 million on ICDs for existing wells, $20 million on Senlac and $70 million paying down the revolver. This left an excess of $50 million. Eye pondered what this could be used for. Eye would have liked them to spend $50 million on new infill wells BUT this would not leave enough over for monthly cash burn.
They could choose to put Senlac on hold for a year because the infill wells on Mckay have a much higher return but eyedeally we would like to see either (I) A JV on McKay or (2) raise another $ 50 mill so that the runway to success is at least one year.
The 6 infill wells on pad 102 would be built with segmented producer wells and pre-installed ICDs which would be much more effective than trying to retrofit them. The nameplate would be 6,000, but if we conservatively assume 4,500 that is still a very attractive investment of capital. You cannot buy 4,500 bbd for $50 million. It should be very value accretive. This would be additional capacity on top of the work over of the existing wells but not additional reserves .
In meye opinion, this is what they should have been doing in the first place and it is frustrating that they take so long to make these decisions.
The strategic review must be all about who is going to feyenance this. If there is an acquirer, they will finance this. If a JV, this sale of equity will finance STP's half of the cost.