BOE Value at KakwaThe investment community will only yawn at a project like Kakwa, where in to years from now, and only after a 600 million dollar spend it will start producing. My guess is that with a 90 mmcf gas plant the production will be significantly under 30,000 boe a day. Not significant, costly to get online, and no rampup or build out production projection.
Liquids rich plays are expensive, and kakwa struggle for many years and billion in capex to get four gas plants in place and over 1B or processing capability, liquids handling, pipeline, etc. Management is not coming clean with the real costs associated with ATTACHIE it is a deep money pit.
Now instead of the investment community getting excited about Kakwa ramping up to capacity, more than 220,000 boe a day, they are watching a capex contrained project well management sets is eyes on projects that are money, have little or no immediate return.
Kakwa revenue per boe is like this 31% gas, 9% NGL's 60% condensate.
Yesterdays spot prices with canadian dollar at 81.05
Gas 3.98 aeco
NGL 20.00 boe
Condensate 70.38 = 86.83 canadian
Per boe revenue = (.31 *3.98*6) + (.09 * 20) + (.60*86.83) = 61.03 a boe
At kakwa a well could produce 2000 boe for its first 90 day of production, it would CF 11,034,144 dollars in the first 90 days. If the well pays back that fast, and immediately adds to cash flow a management team that slows down production to pursue a 2% reduction in decline rates are idiots.
New wells would be new production and should not be encumbered by this bad hedges and failed risk managment strategies.
At 180,000 boe at this prices Kakwa could product 4 billion dollars in cash flow, if the commodity prices were not hedged.
So management needs to smarten up is my opinion. This is an opportunity of a lifetime, and Kakwa has never had the opportunity to perform in this type of price enviroment. Management needs to get off their high horse and do the right thing for shareholders.
IMHO