GREY:VFGGF - Post by User
Post by
nlr2on Dec 31, 2013 4:15pm
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Post# 22049891
Hedges
HedgesPRY as of tomorrow goes from being fully hedged in the mid 90's to having 500 bbl's hedged. The price of oil in Q4 means that Pinecrest should have shown a gain on the hedging program as opposed to the large loss in Q3. Hopefully debt will be down to 120 million for year end exit.
Going into 2014 the capital program should be released around the start of February. I'm hoping for 15 wells drilled so that in 2015 they will have at least 3 new waterflood projects to put on stream. This would cost about 51 million with another 9 million for conversions and maintenance. The other interesting thing will be the timing of the new drills vs the conversion of the 4 waterfloods for 2014. I would imagine PRY would only drill in Q1 and Q4 to avoid the weather constraints that plague the area. So if they could match the losses from conversion to water injectors with gains from new drills that would be best case scenario.
Timing wise if they drilled 5 in Q1, waited for waterflood production to peak in Q2/Q3, converted the four new projects in Q3 then exited with ten wells drilled in Q4 they would best be able to show Q over Q growth and a pretty major year over year increase. The four new waterflood projects would show gains in Q1 of 2015 plus they could plan some new drills for that Quarter as well to prevent major production drops due to declines.
My guess would be that they exit the year at 3000 BOE/D if the Otter projects are showing a response and no weather disasters have occured. Hopefully this will also be with a sub 30% decline as no new drilling activity has occured in Q4. From that base we have waterflood inclines, new drilling using the open hole method, cost savings from electrification and pipelining and 4 new waterflood projects to look forward too. So on paper it looks pretty encouraging.
The caveat being that for 6-8 quarters this team has blown it repeatedly. The infilling to 8 wells per section, Spartan deal, 2013 original capital plan and exit, debt, production estimates and timing of waterfloods have all been disappontments. So to me it looks like baring a collapse in oil or the failure of the waterfloods we should have a good year and exit 2014 in the mid 3000's with no extra debt but the management track record makes me leery.