Currently producing and shut-in Canadon wellsHave a few moments so some additional info on our producing assets ( 2 wells currently in production ) which are located onshore in the Springhill ( Canadon ) formation.
Have sought information but no reply yet.
But, there were 17 wells developed in this field about a decade ago.
4 have been permanently abandoned, 2 are producing and have been for at least 5 years, and 11 wells are shut in.
The current two wells were producing over 200 bepd each in 2010 and, with a workover in late 2013, are now producing about 130 boepd each.
I dont know if the other 11 wells were ever placed on production.
If they were, they are probably capable of producing over 200 boepd each with a workover.
If they werent, the IP would be at least double that , if not more.
RPT has not been focussed on these wells due to their offshore priority, and since then, they had no funds to workover the other wells.
The current two wells are barely profitable at gas prices of about $4 per mmcf.
There is now , in place, an incentive program that enables producers to receive $7.50 per mmcf, if that production is above the base level.
Its clear that our base production is from these two wells iand has averaged less than 200 boepd.
Its probable that those other 11 wells will qualify for the premium gas prices ands and this would make their workovers economically profitable.
My own opinion, derived from the GCA report is that these 11 wells may have never been placed on production or if they were, for only a short period, due to the very low gas prices prevailing 10 years or so ago.
A clue is given in the valuation of this developed formation, and its 13 wells .
GCA gives them a $19 million NPV and a 10 % discounted NPV of $16 million.
Note that developed producing reserves are those reserves that are expected to be recovered from completion intervals at the time of the estimate.These reserves may be currently producing or, if shut-in, they may have previously been on production and the date of resumption of production must be known with reasonable certainty..
You might note also footnote 2 which states that proved , producing reserves may be expected to underestimate actual recoveries, as in nearly all cases, recoveries are higher than forecast Proved Reserves.
Now that RPT have a clean balance sheet, and there are incentives to bring new production online, its possible that these 11 shut-in wells could be brought back online.
Their total incremental production @ 200 boepd, would probably exceed 2000 boepd.
At current prices ( about $26 US per boe ), gross revenues would be about $20 million.
Margins would however be modest, perhaps about $2 million.
However, at $7.50 US gas ( $45 US per boe, and added liquids would bring the average to $50 per boe ), gross sales from Canadon would rise to about $35 million and net margins would be about $15 million.
Of course, they would need funds to bring these back online ( they could high grade, bringing the best online first )..
This is probably why this developed formation is given a valuation of $19 million US.
I hope this clears up any residual confusion.
Note.....boe value = 6 times gas price in mmcf