Arcan Resources Ltd ARNBF

RE:Arcan's Q1 Report is Out

[nlr2]

A few things from Q1.

Those four wells from the winter drilling program are amazing. If you look at the presentation they are so far above the type curve amounts that it is crazy.

If the 8-10 well offset program has the same amount of success as this winters program then Arcan could grow its way out of some of its issues. If the wells ended up averaging IP365 of 200 bbl/d, which is not out of the realm of possiblity if they can duplicate the success, then we would see a big change. Adding 1600-2000 BOE/D would be tremendous.

The cost structure is improving. Over the next few quarters with electrification being expanded and pipelines coming on stream this aspect of the business will just get better.

Stimsol is still an anchor. This has to go down as one of the worst acquistions ever. It literally helped the company for maybe a quarter? They completely misread the activity/ acid demand situation.

Pipeline sale is intersting. I'm curious to see if they are able to offload any other infrastructure assets for cash. 

Maturing asset base. With additions to the waterflood at Ethel and the maturing of the asset base it seems like 3500 BOE/D is a production figure which can be built off of. 

Still looking for that tranformative disposistion. With the operational success that the company is having the sale of Deer Mountian for 100-120 million would be a game changer. It would enable the company to pay off the first debenture and pay down some debt, or just pay down debt and accelerate production additions. If they can keep up their operational performance I would choose the second option. If they could get the shareprice above a dollar then converting the debentures to equity would not be the worst thing ever, clearly not optimal but cash is king. I'd rather have half of a company that is sustainable then all of a company that is broke.

All in all an encouraging report. Sucks about the hedging loss but that is a consequence of the debt and there is no point in complaining about it. If the share price trends down over the next two quarters I would be a buyer.