GREY:STPJF - Post by User
Comment by
ShatnersRugon Jun 23, 2014 11:54am
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Post# 22686014
RE:RE:Senlac Potential Production
RE:RE:Senlac Potential Production
Hey guys,
Just making a quick pit stop here.
Perhaps the strategic review is over with with respect to involving another entity at McKay?
The whole purpose of fitting 2P5 with ICDs is to ascertain if McKay can reach nameplate production levels on Pad 2 in a timely fashion at low relative cost.
STP will not be able to raise more capital at a reasonable cost moving forward. Too extended. Perhaps the reason Senlac is still under a capez freeze is that STP management wants to go full bore at McKay and drill the infill wells. For that, they'll need a cushion, and a lot of it.
Selling Senlac would give them that cushion. It's possible that a sale of Senlac could occur if 2P5 reaches 600-700+ bbl/d. That would be 2 well-pairs on pad 2 producing a decent amount of oil. Senlac can fetch $100-150 million. ($120m was the concensus a while back)
There's your cushion. But before selling off Old Faithful, management had better be sure that McKay can produce. It'd take time and money to complete the infill wells and move forward with Phase 1 expansion. Senlac's sale would make that possible with no dilution to the company. Then again, giving up a guaranteed 5000 bbl/d is a tough call. The cash burn for the first 3-4 quarters would be tremendous, around 8-10 cents per share at the onset, but perhaps worth it in the end. Drilling the infill wells and moving forward with Phase 1 expansion using the Pad 2 design would be the most accretive to the company over the long haul. Gonna take a while before we get results on 2P5. Word has it that they are gonna take it slow before pushing her too hard.
The one thing that I find perplexing is why 2P5? Why bypass 2P2, which was given approval to proceed 6 weeks prior? Pad 1, IMO, is a bust. Done with. Production levels have remained flat despite the ICDs on 1P5. Drilling infill wells on Pad 1 would be a waste of time. Pump the oil out of Pad 2. Focus on what works. Once nameplate is reached on Pad 2, copy same design to Pad 3. Though, that is still a long ways off.... a really long way.....
Then again, an outright sale could be announced tomorrow. Or not. Bah. It's most likely that shareholders will have to wait until August for any kind of news.
Gonna be a long summer. Go out and enjoy it.
Shatzee