RE:RE:RE:2022 Crew Employee Awards If you want to know what I would do, I would tell you the little that I know and show you what I do not know.
I am guilty. I am one of those who think debt cannot go above $400M for Crew. I do not understand why a company would have drilled by uncomplete wells in this environment. I also know it is more difficult to drill in the summer. As a result, I would drill. Get those wells on-line as soon as possible and repeat in 6-8 months. I would keep recycling like that.
I would bring production to 40,000 boe/d as soon as possible then pay down the debt aggressively (no surprise from anybody who read my posts here).
Crew said they spent 60% of their $95M capex budget in Q1. I thought a well cost about $4M from beginning to end. I am still not sure how many wells we are talking about. Oldnagger has given numbers before, and I hope he is right because his number is greater than mine.
When I put all of this together, I would think production is close to 40,000 but how many times did I think production was higher than guidance just to realize Crew is good at sticking with their guidance.
How low should the debt go? I am not sure.
Should they increase production above 40,000 or just aggressively buyback their shares? Up until now, I was thinking about buying back shares, but with nat gas above $6, I am not sure anymore.
One thing for sure, Dale knows what he is doing, and I am glad he is the one making these decisions, and not me.
BeatTheOddsSqua wrote: If Crew brings their wells on production only as required in order to meet their guidance (31,000 - 33,000 Boe/day) instead of exceeding it, this would effectively defer the outlay of capital for drilling, completing, pipelining and facility installations. This freed up capital can then be used to pay down debt as some shareholders have been repeatedly requesting.
The fact that Crew currently has no wells drilling and has not licenced any new well locations, and has not updated their master plan may point to this strategy. However it is Crew and their plans can change from day to day.
The good news is that with the increase in commodity prices, should Crew maintain production guidance only, they will still see a significant increase in 2022 AFF. Deferring drilling and completion capital allows that capital to be used for debt reduction. The improved production rates also requires fewer wells to be drilled which further reduces capital requirements, further reducing debt. Reducing debt by $250 MM should add at least $1.50 - $2.00 per share I am guessing.
On the other hand if Crew opens the valves wide open and produces at max capacity then they are now on an agressive production trajectory and they will have to step up their drilling and increase their plant capacity to continue to grow volumes (you can never miss your production guidance). The increased production revenue will cover the increase in capital requirements as long as commodity prices stay strong. You have to ask yourself "which is the safest strategy?".
There will be a sweet spot somewhere in between guidance and a comfortable production increase that Crew is undoubtably evaluating as we speak. Remember these spectacular well results are only a few months old. As I have said they are in an enviable position with lots of options.
GONATGASGO, It is always fun to play armchair Oil Company CEO ...what would you do?