Southern Pacific Resource Corp STPJF

RE:RE:RE:The jigsaw puzzle

[ShatnersRug]

@Eye:
Kudos on the refinancing call.

Now consider this: We have already assembled the final piece of the jigsaw puzzle.
Back to the 1P5 production levels post-ICD conversation. We now know that 1P5's performance has been better than just fluff. In fact, for more ICDs to be earmarked for Pad 1, my earlier notion of "Orders of magnitude" comes into play here. With cash-generation the forefront goal, they would not pour more cash into Pad 1 if 1P5 results were poor.

Let's assume that breakeven is roughly 6500 bbls. STP is currently sitting at roughly 5,000 bbls/d production. With the aid of ICDs, it is most definitely possible to reach 6500 in 2.5 months. 1P5's numbers are great. There is no other explanation. Assuming a conservative +400 bbls per installed ICD. Actually, that is very conservative IMO. By end of May, STP will have had a total of 5 ICDs installed. 2P1 started spitting out significantly higher output of oil within 10 days given its greater conformance levels over Pad 1 well-pairs. So let's say that the +400 bbls takes this into account. That's +2000bbls MORE per day than the pre-ICD era.(Pre ICD era prod was roughly 4200 bbl/d) NOW take into account that some wells are conforming on their own? Like 2P3 at over 500 bbls/d? Voila. Break even by the end of June with conservative ICD results. I'm not even gonna talk about the CDN dollar and oil price that adds credence to my claim. And before you bring up Senlac, minus a cumulative ~75 bbls average per month will not alter the equation much.

The puzzle is complete. And to answer your questions:

Why the early call feature on the debt? Why the covenant that allows for more debt ?
Answer: Options. Flexibility. Just in case. Why? Because that's the way management rolls. These are the guys that pioneered the rail revolution (or one of the first adopters for sure). They are, if anything, forward thinkers. I do not believe that there is anything else to it.