1. The increase in production guidance of 1000 boe should result in increased analyst forecast prices. Any upgrade in target price will be good for the share price.
Their prior 2022 production guidance was low, so an increase was expected. In my view their 2022 guidance remains low and may be revised upward as the year progresses (and after they update their 2022 H2 capex expenditure)
2. They intend to reveal their updated 2022 H2 Capex Expenditure in May - a month sooner than I expected.
3. The Q1 production of 29,400 boe is 1000 boe less than I was hoping for. Looks like they may make up for this in Q2.
4. The Clearwater update is a combination of inconsistent information. They drilled an exploratory clearwater well and used that data to bid on land. The hole they drilled was a dud. They then spent $13.5 million on 13 sections based in part on that data.
These 13 sections have an estimated NPV of $115 million in bluesky formation oil. There is potential for clearwater formation oil on this land.
What to make of that? They already have 473 sections bluesky and clearwater land. Nevertheless they decided to spend top dollar on 13 more sections. Translation - the new land is better than the existing land.
Its hard to knock spending $13.5 million to get $115 (that is like an instant $1.25 addition to per share value). However I can't help but wonder, what are the other 473 sections like if you felt the need to buy 13 more and pay top dollar!
If you have 473 cars, and 13 more come up for sale - if the price is right, why not buy 13 more. But personally, I'd only by those additional 13 cars if the price was too good to ignore, or they were much better than my other 473 cars!
Maybe the price for those 13 sections was too good to ignore. $13.5 million for $115 million may be too good to ignore............10c ish on the dollar is a desirable number. But I can't help but wonder why buy 13 more cars, when I already have 473? Makes me wonder if the others work?
Lots of contradictory information there - too bad this information was not released in a live conversation so these questions could be answered.
As for the clearwater - its getting a lot of attention, but who cares if the bluesky is just below it and a greater certainty.
5. Whitecap deal. OBE has a 44.8% interest in PCU11 - meaning someone else ownes the rest. OBE was the operator, but apparently wasn't doing any drilling. Whitecap is now the operator. Presumably whitecap will now start drilling. There is no information about the nature of this deal. ie, OBE presumably doesn't have a carried interest - it will still have to pay its 44.8% share of the costs.
Not sure what to make of this. Generally you are better off being the operator becuase you make decisions about how and when to drill. It may be that the other owners wanted this land drilled, and gave OBE the push, replacing them with Whitecap. This land may not be as attractive NPV wise as OBE's other options, but now OBE will have to put out 44.8% of the cost of drilling.
Fortunately OBE likely has plenty of extra cash coming in, so having to pay their share of this activity is not likely to present a hardship to OBE, or limit their ability to drill more favorable wells elsewhere. On the plus side, it may result in OBE's production increasing more than expected.
6. Willesden Green Average IP30 of 365 boe. 10 wells were been drilled. 6 are producing, and 4 of those just started producing in the last 6 days. Translation. 10 wells drilled (Q1 and maybe Q4/21). 2 of those were producing in Q1. 4 more started producing in Q2. 4 more have not yet been tied in. ie something like 1400 boe more right now in Q2 for the next 30 days, and then declining a bit in May and June.
7. Pembina. A 3 well pad is expected to come on production in April (they have an average IP30 of 240 ish boe), so expect 700+ boe added in April.
1 vertical Devonian well is drilling and expected to be producing after break up (ie June hopefully). IP30 is 250 boe ish.
So maybe 800-1000 boe more from Pembina in Q2.
8. Bluesky drilling. Two bluesky wells are expected to be on production in mid April and two more to be on production in early June. The bluesky wells drilled late last year produce at about 450 boe/day. No indication of what these new 4 wells will do, but using the same numbers, suggests about 900 boe coming on in mid April and another 900 in early June. (this is what I want to see more of).
9. Q2 production additions. That sounds like another 3800 boe ish coming in during Q2 - with about 3000 boe of that coming on in April.
That sounds like a pretty good Q2 to me.
Q1 averaged 29400 boe. Some of that will decline in Q2. About 3800 boe will be added in Q2.
My prior target for Q2 was 31400boe. That may be on the high side now, but may also still be achievable. If not 31,400, then somewhere between 30,400 and 31,400.
10. That adds up to a string of good news (production increased in Q1 and is going to increase again in Q2) - and one disappointment (a dud clearwater well)
I still have trouble with their clearwater language.
"A high-quality reservoir was encountered, but the well did not produce hydrocarbons at an economic rate."
If you can't produce at an economic rate at $100 boe for heavy oil, then that is NOT a high quality reservoir. Unless there was some accident with the well, and it clogged up. A high quality reservior means a lot of oil is present, and it flows through the rock. I don't understand how you can encounter a high quality reservior thats shallow (clearwater), when heavy oil is $80-100boe, and it not produce at an economic rate. The only way that can be uneconomic is if the oil doesn't flow out in sufficent quantity to cover the cost. How is that possible from a high quality reservoir, unless maybe the hole collapsed or similar????
"This well directly informed our bidding strategy in our recent land sale success"
How? You mean it kept you from bidding on the land next to this DUD hole, but spent $13.5 million anyway?