RE:RE:RE:RE:New comments from "Value Digger" (TOP-100 Financial Analyst)Thanks for pulling all that together, B&D.
A few points come to mind.
I have no trouble believing that Chinook will meet its exit guidance of c. 6400 boe/d: they do, after all, know what wells they expect to be producing what. They also have at their disposal the switches and dials to make it happen in that they can always nudge production up or down by turning on or off their legacy wells at Black Creek, Martin Creek, and Boundary Lake.
And, yes, it shouldn't be too hard to get to 6400 from the 4850 that they reported for July 18-24, though in this case there might be a surge in their wells production, which had all been shut because of the McMahon gas plant re-fit. Turning wells back on after a shutdown often leads to a spike that after a while turns to its expected point in a decline curve. In fact I think the temporary nature of the July spike can be seen in slide 9 of their September presentation at the rightmost point of each individual curve. So that 4850 in late July probably shouldn't be a base to which we add the new wells' production.
I would suggest a different calculation, which gets us to meeting guidance:
- We expect to be at 25 million cubic feet (or about 4200 boe/d) when two of four wells come on line in October. (That's the current compressor capacity.)
- We've been told that these October wells will be run at a restricted rate, surely because of the 25 million cubic feet.
- As you point out, the two new wells, combined with removing or lessening the restrictions on the October wells, should comfortably get us to 6400.
(All this, of course, assumes that the compessor expansion happens on schedule.)
I'm nonetheless a bit skeptical about a 'beat', for the simple reason that the company has not revised their guidance upwards, but instead restated it. These guys know what they are doing, know what to expect from each well and how their wells react to shutdowns and restarts, etc. That's good enough for me.
[quote=Bean_and_Dunn]Obviously i am just dreaming.
The facts are that CKE did average 4,850 BOE/D from July 18-24th.
Their 4 new wells were substantially more successful than anticipatel and will add very significant production. They do also help delineate the play.
At first blush this production will be around 7,048 barrels per day of which a significant amount will be condensates which attract premium pricing. Even if CKE cuts back substantially and only produces at half the initial production say 3,500 BOE/d we could be looking at December prodution 8,300 BOE/d. Even allowing for production declines in CKE's other 7 wells of 1,000 BOE/d we are still looking at 7,300 BOE/d These numbers suggest that CKE has met all its projections and then some. At the same time it has reduced costs. Payback is shortened, and because they are concentrating their energies in a one setting operating costs are and will drop significantly.
Soon would be investors will quit "looking in the rear view mirror" and will begin looking more and more towards the future. Chinook's past earnings history would scare any novice off. I totally agree. Most automatic generated program buy sell recommnedations would quickly rule CKE out as an investment.
This is a turn around story if I have ever seen one. It is not the same company it was 1 year ago. It no longer has high operating expense wells to balance against new wells. Year end production last year 1,643 BOE/d is tiny compared to present and expected year end prodution. First half production averaged a constrained 3,576. Okay that is more than a double. Even if CKE only adds half of what the latest 4 wells have come in at production will quadruple from year end. At present there is not any debt, production costs are dropping. This is the 4th quarter of positive cash flow. Sorry for getting so enthusiastic.
"Chinook owns 70 (59 net) DSU’s of Montney rights at Birley, along the shallow edge (<1,400m depth) of the prolific Montney fairway." In my post I quoted from page 12 of their recent presentation.
"Netback recently increased by $2.70/boe as a result of CKE’s new gas handling agreement in NEBC (covers 20 mmcf/d of firm service until May 2019, with interruptible service for volumes exceeding 20 mmcf/d)." The quote above comes from the company statement on page 12 of their September presentation and should help to dispell the worry some posters have tried to engender in regard to falling prices in the gas area at least for 20 mmcf/d for the next 1 1/2 years.
I hope this helps clear up matters.
B&D[/quote]