Post by
JackDeeValentin on Jul 03, 2015 12:34pm
what some investors do not like -- but is it relevant?
Couple of factors that have disappointed instituions and other investors
1. Several qtrs of falling OIL production despited growth in overall boe/d
2. Lower than expected reserves adds as per last reserve report
3. Alberty Royalty uncertainty
4. Technicals are broken and although we don't care about others do; there was a technical comment from broker this week pointing to $2.00/share
5. Higher gas to oil ratio on some of the more recent vintage Ante Creek wells
6. Shut in wells at Kaybob
How this may change?
1. Despite a higher Gas to oil ratio; Ante Creek wells are best in class with high IRRs; and quick paybacks at $50-$60 WTI -- some of the lower oil production was mechanical as the second phase of oil battery expansion did not come up until early 2Q -- oil production in 1Q15 was 5488 bbls/d and has been modestly trending lower over the past few qtrs. Although just a function of bringing behind the pipe Ante Creek wells on line in 2Q15 due to their infrastructure expansion being finished at the end of 1Q15; oil production should reverse the trend and come in closer to 6200-6300 bbls/d in 2Q15. At current levels I think this oil production factor is important and will show up in 2Q15 results.
2. Someone posted John Ferguson's interview on BNN and interestingly oil the day of the presentation was $48/bbl (WTI) and RMP shares were $3.89. Keep in mind their guidance this year is based on $49 WTI and although oil has recently come back from low $60's it has been well above their guidance throughout 2Q15 and could reasonably trend above their guidance for all of 2015 if we stay in $50-$60 range. Their guidance was conservative in terms of commodity prices and production levels. This has been a bit forgotten or dismissed as shares trade lower every day and decline in share price is the main investor focus the past couple months.
3. Lower than expected reserves. They booked conservatively, and many reasonable unbooked Ante Creek and Waskahigan locations have value above and beyond their stated $4.53 fully diluted NAV. In addition to unbooked locations; there is further upside from secondary recovery at Ante Creek.
4. John, Craig, Dean et al are not a group that jump up down to push their shares (maybe they should, I dont know) but they are a group that executes from a return on capital perspective, manage their balance sheet very well, will not spend beyond cash flow. This company is in good shape under current commodity prices. This company is better than most and results should reverse this persistent negative trend.
5. The value and assets are compelling. May go lower in short term (that brokers $2.00 technical call is looking pretty dead on)
........but it won't be down here in 6, 12, 24 months from now
Comment by
robt1234 on Jul 03, 2015 2:54pm
Does anyone think there are people making money on the short side who are getting to the point they will switch their posture?