RE: Viking Asset Purchase
From the prior guidance and reports:
- 2008 / 2009 / 2010 averaged 899 / 1480 / 2513 boepd (Viking at 993 boepd), respectively
- 2011 Q1 / Q2 / Q3 averaged 2773 / 3308 / 8450 boepd (Viking at 2400 boepd), respectively
- 2011 Q4 expected to average 8750 boepd (Viking at 3350 boepd)
- 2011 expected to average 5956 boepd ($133M spend, excluding the recent Red Water acquisition)
- 2011 expected exit rate of 9000 boepd (down from 10,500 boepd following the merger)
- 2012 expected to average 9750 boepd ($155M budget, production guidance lowered)
- Dec acquistion at Red Water offers an additional 600 boepd
My thoughts:
- not sure why the current exit rate projection has been reduced to 9000 (from 10,500 boepd after the merger), since the Orion sour gas problems accounts for only 500 boepd of the shortfall
- $155M spend in 2012 should add 2000 boepd in net growth; hence, 9750 boepd annual average seems conservative
- no mention of the Orion sour gas shortfall (if back on-stream mid year then 250 boepd annual upside)
- perhaps more conservative Viking projections (not much credit for the 600 boepd acquisition)
- no credit for farm out production (reasonable if costs are paid out first, upside for 2013?)
- 9750 boepd offers good growth on a year-over-year basis, but 10,500 boepd was needed to avoid disappointment
- my guess is WFE will look mid-year and will increase their budget again if the markets seem stable
- WEF might benefit from a strong 'communications / investment advisor' to manage these sorts of events to spin out bad news with silver linings, and to upgrade promotion in general ... Suncor is one of the best at this
- SP is holding steady today so the market expected this news, but look for some downgrades on the targets ... but not to worry since we are already beaten up way worse than this news could possibly suggest
- there are some gems in the news release also (Viking formation understanding and economics improved, acquisition appears positive)
I might give management a call to see what is going on. They tend to be straight shooters, but in this rare instance I cannot quite connect all of the dots. Let me know if any of you figure it out before I can.