RE: Only way is up! don't see any insiders buying at these low levels...not a good sign
If you are referring to the lift numbers, i.e. % increase over previous type curve data, these are my calculations. The gist of the story is that their experience with Open Hole Packers are producing a type curve materially better than their average type curve. They stated that they came to this conclusive after extensive study of their proprietary historical database.
I agree totally that the waterflood results are the best, most convincing, that we have seen to date from the Carbonates. Their story of the malfunctioning machinery affecting Project #2 through breakup is totally consistent with what Wade told me in April...they simply couldn't get in to fix it.
To me though the waterflood story is sort of baked in, just waiting for proof as they implement. The completion technology change and its lift on the first year of production is totally incremental and exciting. It had reached the point where the new wells were really marginal without waterflood. Now, if they get back to the 1.5 year payoback as indicated, they can back to the story wherein the new well gets to run at least a year, just about pay itself of, and then get water flood adjusted either as a producer or injector.
After the Q1 results Alta Corp had downgraded, basically because they saw the initial production dropping to what they consider margin levels with a 50% profitability and payback period longer than 2 years ( this is hearsay as I do not have the report). They had mentioned that they felt the company needed a payback of less than two years and 80% or better profitability - et voila Open Hole Packers. They will probably want to see actual results duplicating this type curve before readjusting their view.
The problem the company was facing was that the low initial production was dragging out cash flow, forcing more debt to build well inventory, without which inventory the waterflood is simply a nice concept. If they can get these payback periods and higher initial cash flow, they can keep building inventory, even though to total recoverable reserve number does not change.