Pangolin Diamonds Corp V.PAN.H

Why Rumak wants to raise $25 Million

[koldrake1859]

PAN's Fred Rumak has declared his intention to raise $25 Million above $1/share. The question is why ?

At about $220,000 cost per well this would allow him to acquire about 110 producing wells.

Now if we look at the average production per well in the Antrim shales we find that, as an example, Atlas Energy Resources produces 59 Million cubic feet of gas out of 2150 wells which works out to 27.5 TCF / well / day. 

This is all well and nice except that that the vast majority of these are old wells that have settled down to a quasi steady state of gently declining production that can last for 30 years or more.

So what could be expected from the younger wells than PAN wants to drill ?
Initially in the first year of production rates of 7 or even 10 times higher than mature wells are common with the next 2 years around 4-5 times that. So on average it would not be unreasonable to expect for the first 3 years about 4.5 times 27.5 TCF per well per day which works out to about 125 TCF / well / day.

Now with today's $12.5 per TCF price of gas this would amout to a cash flow of about $60 Million per annum for the next 3 years providing ample capital from year 1 to acquire an additional 220 wells in year 2 which means that by year 3 the cash flow would allow the acquisition of 660 new wells so that by around the end of the 4 year period PAN would have about 1000 producing wells which would bring in a cash flow in excess of $500 Million for the subsequent year to further expand the production base until the steady state production in reached and continues to pay off for the next 30 years.

It would be misleading to infer that PAN could do this so fast on its own but this is only a realistic scenario of what PAN could achieve with the right capitalization and some added value partners except that the ultimate number of producing wells could end up being well in excess of Atlas' 2150 in their Antrim property.