Does VII's production decline rate remain above 30%? According to BMO's (Bank of Montreal) production chart of 2018, VII had one of the highest decline rate in the Canadian energy patch until mid-2018 exceeding 30%. BMO has not published the updated 2019 chart yet. BMO usually publishes it in the second quarter of the year.
Amid volatile oil prices, a key criteria when investors buy energy producers is to pick those with low decline rates, below 20%, low cost wells and healthy balance sheets. They can survive amid uncertainty and grow much easier than the ones with decline rates. They are acquired at the end of the day. This is why I recently increased my position on Cardinal Energy (CJ) at CAD$2.15 and Ring Energy (REI) at $4.55.
Aside from VII's expensive Montney wells, it seems VII will need a significant portion out of its annual operating cash flow to keep its production flat in 2019.
VII's sustaining CapEx in 2019 is $1.1 billion out of $1.25 million total CapEx, see slide 10 below:
https://www.7genergy.com/upload/event_summary/14/5f1d2914be06/january-2019-vii-corporate-presentation---final.pdf
So I think VII does not have production growth problems only in 2019 but these growth problems will deteriorate in 2020 and VII's treadmill will become worse because the sweet spot is a finite area. The sweet spot in Nest 1, 2, 3 is not limitless.
My concern is whether VII has enough wells to maintain its production flat with $1.1 billion in 2020.
Will VII need $1.3 billion or $1.5 billion to keep its production flat in 2020?
And will VII's sustaining CapEx be $1.7 billion in 2021?
I emailed VII but they have not answered me yet.
Unfortunately, VII does not mention its decline rate in the presentation above. Why? Do they hide something? They should be transparent. Being shady does not help investors.
Does anybody know VII's decline rate? Please facts and links only. tia