The new contract with Alliance & the shut-in 2,600 boepd/Q1 How much of those 2,600 boepd have been connected back again into the system since nat prices have risen significantly lately? This is a lot of production that can affect significantly CKE's revenue in Q2 and the next quarters.
As a reminder, CKE shut-in 2,600 boepd natural gas volumes due to low prices, according to Q1:
"However, as a result of continued depressed pricing at Station 2 that fell to C$0.89/GJ during March, by the end of the first quarter, we temporarily shut-in approximately 1,100 boe/d of production volumes which were not tied to firm processing or transportation commitments, in addition to the 1,500 boe/d of production we had shut-in prior to the first quarter in response to lower commodity prices. Consequently, our average production in April was approximately 4,800 boe/d."
But things have changed completely since then.
Since May 1st, CKE has been selling 1/3 of its natural gas volumes directly to Chicago thanks to the new contract with Alliance pipeline, see the new Presentation (slide 5). In Chicago, it gets Henry Hub that is currently at US$2.50-2.60/mmbtu or about C$3.30-C$3.40/mmbtu, which is a huge difference compared to Q1 when CKE didn't have this Alliance contract.
Additionally, oil and condensate prices have risen significantly from Q1. And CKE produces light oil and condensate too.
So CKE's funds from operations in Q2 have risen significantly relative to Q1.
And CKE's CapEx for 2016 is just C$10 million and it has spent about half of it in Q1. So CKE's cash of C$31 million now after the recent sale of C$7.5 million, will continue to increase by year end.