TORC Oil & Gas Ltd. T.TOG

lexvest:my problem with managment isn't

[greeneggs]

the hedging, it's the fact they haven't increased their drilling budget to coincide with the 145 million BOE's 80-85% of it light light oil, and most of that recieving a total royalty holiday on the first 32,000 barrels produced. On top of that by hedging 130 plus range for a year out, guarantteing payback of costs in 5 months, and 4 million plus of cashflow within a year of drilling a well. Second year between the kick in of royalties and fall of of production and a drop off in oil to the 100 dollar range, the well would still bring in 1 million annualy, which is all free cashflow because there are no incrmental costs associated with it.
And if there is a lag time for drilling equipment it's going to just get worse, and costs are gong to go up, so you'd better start throwing money around now. If you listen to a conf call, their answer to being prodded about rasing their  drilling budget was along the lines of "well we usually like to do things a certain way, i.e they didn't adjust their actions to the changing enviornment.  Each decision should be based on evaluating the ongoing situation, (dynamic vs static ) rather than some comfortable MO they've followed in the past.
Old decision paradimns don't hold true, when you can hedge to lock in oil with 110-120 netbacks per barrel.