Bored and watch rig working...Just to say: I am not a short, nor am I a long investor, but opportunity trader as I am sure someone will send hate my way after reading below.
Up until 6 months ago, I had been working in the adjacent, but same general field as Legacy for the past 3 years. Something that I have not seen mentioned anywhere is the fact that they have cheaper production options than a company that is only drilling Bakken wells which is the norm. in the area. In the SE SK field near North Portal there are 4 layers of oil, Midale, Frobisher, Bakken and Three Forks (that I know of). The Bakken and Three Forks cost are at least double to complete over the Frobishier and Midale. The Frobisher is a formation that can't be sand Frac'd (or has not been yet that I know of), but a shot of acid makes it flow nicely, and the Midale formation which is sand Frac'd. The completion costs for these shallower wells are less than half the price of a Bakken. Not to mention the extra drilling costs associated with a Bakken (1850m) or Three Forks (1900m) over a Midale (1550m) or Frobishier (1600m) well. Then of course there is the royalty holiday the government of SK gives on freehold land which covers a lot of the initial costs. The thing that seems to be unspoken is that all four formations contain light green oil (API 40) the same as is found in the deeper and more expensive Bakken wells, unlike in the surrounding area where the Midale and Frobishier wells produce black heavier oil (API 30). Legacy is in a very unique position which will help them out during this time of lower netbacks. One of the wells that is now owned by Legacy that I completed 3 years ago, flowed for months, and is the same type well that started them into the Midale formation. (I was there before Legacy bought the company that was partnered on that well with us, but they continued on with it, and others in the Midale formation as you all well know). So if they want to keep drilling, and growing which seems they do, they have enough land that they could just drill Midale and Frobisher wells for the next ten years, and keep their costs to a minimum easily, they do not need to cut anything just keep drilling Midale wells. This is what I know about Legacy and as far as I can see it’s just a matter of time before they show all the nay sayers what’s up. And given the fact that they are so undervalued even at these oil prices, it is just time that will sort this all out so we can get back to realistic valuations as opposed to the fear driven ones.
Below are two articles that in my estimation explain a lot of the reasoning behind Saudi (OPEC) actions I am sure there are others, but I would bet if the US/Iran deal fell through, and the conflict in Syria is sorted to Saudi's satisfaction then we will see a big change in the Saudi stance on cheap oil. Because we all know they love their money, and don't give it away like they are without some expected payout of some equal value in the end.
But by no means am I saying the oil price will find a bottom soon or bounce back soon, but when there are a number of countries that are balancing on the edge of a financial knife it is pretty sure that something big will happen one way or another before long. All these other countries feeling the sting of one Royal family who is clearly manipulating something they used to have a tight grip on, and are now feeling it slipping through there fat fingers.
All my opinion of course take it with as big or as little grain of salt/Frac sand as you like ….
https://world.time.com/2013/11/26/saudi-arabia-considers-nuclear-weapons-after-irans-geneva-deal/
https://www.frontpagemag.com/2014/dgreenfield/saudi-oil-price-war-forces-iran-to-cut-hezbollah-aid/
Below is from Legacy Q3-2014 Financial Statements:
“Midale
Legacy had an active quarter developing the Midale Formation with the drilling of 15 (14.2 net) wells in the Taylorton, Pinto and Steelman areas. This drilling included successful development, step out and exploration wells. Production results have continued to exceed the Company’s type curve. Overall, the average 30 day initial production rates from the 19 wells with 30 days of production history was 250 Boe per day per well. Well costs have been reduced over the course of 2014 by $150,000 per well and additional cost savings are anticipated. The Steelman waterflood pilot continues to show positive response, as the two wells offsetting the injector have shown a 500 percent increase in oil production. Additionally, wells outside the initial pilot area have demonstrated increasing oil production. The Company has commenced water injection in two other Midale waterflood pilot projects at Steelman.
Legacy was the first mover in the Midale play more than three years ago and has utilized its leading horizontal completion expertise to generate these tremendous results. ”
*This last statement of theirs is BS, because I worked for the company that was the first to complete and successfully Frac a Midale well in this area, and I never worked for Legacy, but I sure saw them parked down the road checking out my 50’ tall fireball shooting out of the testers flare stack… but I guess seeing how the company I was with is no longer in existence I’ll let them have their glory… after all I am an investor too… LOL.