RE:RE:RE:this is realThe company has not provided on Sedar thier NI51-101 for all of their properties. They have only provided summary documents. The NI51-101 would show the real value of the assets as it includes all future development costs. As far as I can tell this set of documents does not include that.
OK. For you slow ones... Gross and Net. Gross is the whole number, Net is a portion of the Gross.
Net can only be up to 100% of gross
Lets look at the PDP numbers (PDP is Proven Developed Producing)
Here are the volumes quoted for Natural Gas Liquids from the NI 51-101F1 report from Sedar:
PDP Gross Mstb: 88.9
PDP Net Mstb: 1,005.5
Net is 1131% of Gross. This is what is called bad math.
The PDP, PDNP, and PUD numbers for the company Net share are 1,005.5, 259.3, and 1,168.4 Mstb . Remember these are in Mstb which is a barrel number in the thousands.
Now look on the next page under Unit Value of Net Reserves. Under the Light and Medium Crude Oil they note the folowing net Gas reserves:
PDP, PDNP, and PUD are 1,027, 259.3, 1,168.4 MMcf respectfully. These have now become gas reserves from a Mstb calculation. That's a really bad error.
The probable also has simmilar problems.
In total, it appears that the basic reserve calculations are all wrong. More than $9.3M wrong.
Most legitmate companies produce land maps of thier interests, note the zones they are drilling, and provide estimates of the Captial expenditures and rates of return on thier investments. This company only states some bizzare field net back summary ($9.51/boe in Q4)
then subtracts G&A and abandonment expenses to arrive at a Corporate netback ($6.51/boe in Q4). That's a bogus metric.
Most legitimate companies quote their F&D costs, which are a function of the reserves and the cost to develop them (industry average is around $20/boe). They have a current RLI (reserve life index) of less than 6 years on oil and 4 years on gas. That means a 23%/26% decline in reserves per year respectfully. Production declines fall roughly in step. You need to show how you will convert probable into proven, how you will convert PUD to PDP, and how you will grow.
The company has stated it has big plans:
"The first quarter 2014 is the solidification of our foundation, 6.27 million boe of reserves with a book value of $42.5 million, $11.50/bbl for the Company's oil and liquids and $ 0.54 per mcf for natural gas. Our low cost production continues to grow as anticipated, with a focus on achieving annualized cash-flow that positions us to grow organically to more than 6,000 boe/d in 2016, through further remediation and development drilling."
Well that would mean that they would have to drill everything in thier reserve inventory and more over the next 24 months. That would require a massive amount of dollars. Serious investors will want to see much more information before they would ever put $ in. And don't think any other comany would want the massive abandonment liability that this company has accumulated, not to mention that current growth activity has been focussed on buying more ancient gas assets.
In summary, and last post, this is not an investment for the future. I have done my homework, you should too. Run, don't walk.