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Magnum Hunter Resources Corp. Message Board

  • rrb1981 rrb1981 Nov 10, 2010 7:44 PM Flag

    Gonzo Hunter

    The results from Gonzo are considerably less than I expected. The lower IP rates are somewhat troubling, however, many other issues are unknown. The issue is that it is difficult to estimate IP rates in plays that are not mature. While the lower IP rates mean a lower IRR, the fact that oil has quietly creeped up to $87/bbl means that MHR should still be getting a very strong IRR. My hope is that they will achieve better IP rates in the future and are able to drive costs down. Also, it remains to be seen what kind of decline rate they exhibit.

    What we have to hope for is that Gonzo, and future EFS wells that MHR drills, produce better IP rates and have shallower than forcasted declines.

    I think MHR will be capable of making improvements, but the results are disappointing in light of the considerable hype. I think what will likely happen is that MHR will have some wells with excellenet rates and some with average to sub par rates, on the whole, it will be a very good play with IRRs that average well over 50%, meaning paybacks of around 2 years or less on average.

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