VIRGINIA HILLS OIL CORP VFGGF

Production won't be flat in 2013

[splurge]

My guess is that production in 2013 will exceed 9400 b/d at year end. Because they will wait till half way through the year and then increase their debt maybe $30 Mln let us say. They are forecasting debt at year end to be $45 Mln in 2013. Add on $30 mln more and that could add maybe close to 100o b/d by year end by adding more water flood which would respond by year end 2013. Also I think they will have some cost savings from transportation and electricity because they seem just a bit conservative on netbacks. They certainly look under levered vs competition in their presentation which I think was extremely well presented. As decline rate slows following two years they will be able to add almost another 700 b/d each year  without increasing spending so the debt to cash flow numbers fall back into place quite nicely percentage wise and could be ramped up again. Also they will no doubt use their debt capacity to purchase some tuck in acquisitions and that would be accretive to cash flow most likely as opposed to shares where a divy would have to be paid in exchange for assets. These guys and this asset base with their strategy will allow the payout ration to come down in 2014. They have a much longer investment horizon than the high growth Spartan shareholders who are quite expectedly are bailing. I bought  Vermillion at $10 in size and Cpg at $18 in size and just bought this one in size. Please anyone     let me know if I'm likely wrong on this one.