OBE Q2 ReflectionsToday is the final day of Q2/24
OBE had an event ful Q2. A May and June to remember. Lots of ups and downs. Its only now, on the final day of June, that I've started to reflect on all that happenned.
The Prior Quarter
It started on May 2, when OBE released their Q1 results. As I wrote at the time: The first thing that stands out is Q1/24 production at 34,238. It is a solid increase. However they prevously indicated production of around 34,000 at the end of 2023, and about 36,500 around the end of Feb/24.
There was nothing wrong with Q1's production of 34,238 - it was better than the prior quarter, but one could not help feeling disappointed when field estimates were about 36,500 at the end of Feb, and Q1 came in 2000+ BOE lower at 34,238.
The Woodland Cree Blockade
Then on May 5 the Woodland Cree blocked access to OBE's Walrus oil field, causing OBE to shut in 1,275 barrels of oil.
Then on May 11, the Woodland Cree moved their blockade from Walrus to the Harmon Valley South field, allowing OBE to restart the above 1,275 Walrus barrels, but shut in 4500 BOE.
This Harmon Valley South blockade, continued until June 11, at which point OBE was able to restart the shut in oil.
The Woodcote Purchase
While all this was going on, OBE bought 1,700 barrels of Woodcote's oil production, and a large amount of their land. As mentioned elsewhere, this purchase date was retroactive to May 1.
The Production Update
Then on May 28, OBE announced its production was estimated at about 35,500 boe. This did not include the 4,500 boe shut in by the Woodland Cree blockade, or the 1700 boe purchased from Woodcote.
Lots of moving parts - oil shut in here, and oil added there. When the blockade was over; the woodcote purchase closed, and the dust finally settled, the realisation started to take hold...........OBE may be producing at 41,700 ish boe!
Maybe there was some production decline from May 28 to June 30, but even if that were the case, OBE is likely a 40,000+ boe producer as of today!
That sounds great, particularly compared to the 34,238 boe average from Q1.
But there is more!
Oil companies report their production, and that information is public. Web sites like petroninja allow the public to search through this data, and look at individual wells.
About three and a bit weeks after the end of the prior month, Petroninja updates. On June 27, Petroninja showed OBE's well data for May.
What Petroninja reported, was impressive.
The Harmon Valley South 8-28 pad (which was shut in because of the WC blockade after the first 10 days of May), contains 2 wells. We knew these were good, because on May 28 OBE announced they had an average IP30 rate of 554 boe each (100% oil). But according to Petroninja, they were even better over the first 10 days of May. During the first 10 days of May, these two wells produced at 920 and 663 barrels of oil each! WOW
But thats not all!
There were three new Dawson Clearwater wells to look at. The Dawson 7-13 Pad added two follow up wells to the one they put online around last Nov. Petroninja showed these two wells produced 495 and 317 barrels of oil in May!
Then there is another Dawson well at 7-27, which just started up in May for 17 days (ie still cleaning up). During those last 17 days it produced at 273 barrels according to Petroninja!
OBE drilled an adjacent well below. This well had not come online in May, so there was no Petroninja data to view. This well may come online in June, and will help ofset declines elsewhere.
These are good well results. ie, OBE didn't just get to 40,000 ish by drilling lots of so-so wells. They've started to find some really good ones.
But thats still not all!
A bit to the East of OBE, a private Company called Islander has been drilling a slightly deeper zone (discussed elsewhere) called the Pekisko. They've been getting really good results - ie 500+ boe wells. Part of the Woodcote land acquistion (Gift Lake) is immediately south of this Islander hotspot. OBE also owns the land North of this Islander hotspot.
On June 13 OBE applied to switch two oil wells and facilities owned by Paramount to OBE. These are located immediately West of Islander's hot spot.
It doesn't take much to extrapolate that OBE may be wondering if they can duplicate Islander's Pekisko success.
Improving Prices
While all this was going on, oil prices, and the CAD/USD exchange rate improved compared to Q1.
OBE is transparent about its FFO sensitivity to changes. I can't cut and paste their sensitivity chart here, but for those interested, you can find it on page 13 of OBE's Q1/24 Managment Discussion and Analysis which is avialable on thier web site under Financial Documents.
WTI increased USD 3.65 in Q2 vs Q1 ($1 equals an extra $2.8 million FFO/quarter)
The WCS discount shrank by USD 5.78 in Q2 vs Q1 ($1 = $1.25m more FFO/Q)
The exchange rate went from 1.349 to 1.368 (1c = $1.64m more FFO/Q)
Every 1000 barrel increase in liquids equals $6.725 million more FFO per quarter.
In Q1 OBE's FFO was $84.4 million.
I don't know what OBE's liquids production was in April, so I don't have a firm idea of their average Q2 production. That said, a bit of guessing on production, combined with the known price changes, produces an estimated Q2 FFO of 50%+ more than Q1
With all the adverse Woodland Cree related blockade shut-in news, it caught me by surprise that OBE's Q2 FFO may be 50% ish higher than their Q1!
Last year OBE announced its Q2 on August 2/23. I imagine it will be a similar date this year. I've a feeling this time, it won't disappoint.
The above are my thoughts - they may be wrong - please come up with your own.
Sincerely,.................