The Shat is back and you're gonna get in trouble!!hey ya! hey ya! The Shat is back!!
Things have kept me away from investing(not STP) and my favourite messageboard for the last couple of months but the time has come to get back on the saddle. Tax-loss season is upon us and there will be bargains to be had.
I've caught up on the posts over the last couple of days to reacquaint myself with the topic-du-jour. I gotta say that, despite STP being on the verge of bankruptcy, this is still an active and ENTERTAINING board.
Another Hitler comparison? Seriously? Yes, the name "Himmler" is of Germanic origin. To insinuate that all people with said surnames are associated with the Nazi Party or Adolf Hitler is.... idiotic. If my name were "Joe Minghia", would that make me related to Benito Mussolini?? Please. Monzie makes good points more often than not, but sometimes pulls a lenny. IMO, whomever puts monzie on 'ignore' is doing themselves a disservice. We should always digest others' input no matter how much we may disagree on the message. It acts as an investment compass. I wish I had paid more heed to EyeInvestor's posts in the past. I would have made WAY more money.
@Bambus - ICD effects
Back in February and March of this year, I researched this topic as best I could. I am not an engineer but do have a diversified background and a rather large head. From the 3-4 papers that provided readable results to the layman, the average ICD improvement ranged from 5(extreme low end) to 20(extreme high end) percent. With respect to STP, I was CONVINCED that these numbers would EASILY be eclipsed. I based this assumption on the information that the company provided back in February and March. I thought that perhaps the ICDs would provide that one little nudge that would lead to targeted conformance and 75-80% nameplate oil production. I gambled big on this assumption. It still burns me when I re-read the news releases of Feb 10 and March 17 (from memory). 900 bbl/day from 2P1..... Well, that figure is closer to 400 today. STP management GROSSLY exaggerated the effects that ICDs had on their wells. Even in a recent release they stated a 60% increase. Ha. Sorry guys, I'm getting off-topic. Here bambus, let me cut to the chase. McKay was producing 2,000 bbl/d(ballpark) prior to first ICD installation. Let us assume a 15% increase(mid to upper end) in well performance with ICDs. The bottom line? STP-McKay will be lucky to maintain 2,500 bbl/d. Look at September's individual well performance. Pad 1's wells are all but dormant. If you're looking for a sunny day scenario based on ICD effects on well performance, don't.
Red Earth
The sale of Red Earth makes little sense to me. When STP recapitalizes(not if, but when) having a PROVEN asset like Red Earth would provide at least some leverage in any deal. To sell it off only postpones the inevitable. That $19.5mil will disappear faster than people think, and in a couple of months, STP's bank account will redline once again.
Debs
There's a reason debs are trading at $3 but I'll leave that for another thread. Oh lenny.... don't rely on the debs to make money for xmas shopping. If you lose your shirt, you can always get the best lead-laden paint chips from older manufacturing buildings. And if you're lucky, you'll get your hands on some asbestos too!!
The future
Will STP recapitalize or will STP declare bankruptcy? In my mind, these are the only two plausible scenarios. My feeling is that the latter will occur. Senlac is a proven money-maker, but it's the only proven money-maker that STP has. Unfortunately, Senlac cannot shoulder the enormous debt burden. Management gambled on McKay and lost. The plant itself is worth a mint, but the oil assets are proving too costly to produce. I don't see the logic in drilling infill wells when each well will produce 200-400 bbl/d. Is this economical? Is additional 6 wells on Pad 2 @ $8.5mil per well worth it? I'm referring to the estimated $51mil for Pad 2's facelift. Which entity would be inclined to fork over hundreds of millions of dollars given a) STP's debt and b) McKay's tricky sands? Yes, I said hundreds of millions of dollars and not 51 mil. It will take time to drill the wells and it will take time for them to conform. All the while STP will bleed cash. Lots of it. If an entity decides to pump money into STP, rest assured that an adequate cushion will be required to weather the journey.
Good to be back.
Shat