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Constellation Energy Partners, Ltd. Şti. Message Board

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  • rrb1981 rrb1981 Nov 18, 2012 2:44 PM Flag

    Lack of Production Growth

    You make a more convincing argument for CEP to retain the Black Warrior assets than to sell them.
    If CEP is indeed going to lower their operating costs, why not sit back and collect the margin and hedge the production for '15/'16 at $4.50?

    What you are in essence saying is that CEP should throw away the upside.

    A much better solution would have been for CEP to raise equity back when they wer at $3-$4. They could have used that cash to meaningfully increase oil production.

    Instead, they have been trying to boot strap themselves out of a tight spot.

    I wonder if CEP will be able to show improved oil production next quarter? I wonder if these guys will start giving investors meaningful info in the conference call, such as average decline rates for their oil production..how much of their capex is going to oil and how much is for reworks and recompletions

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    • This is not a perfect world. in a perfect world you would be right. we do not know how much
      the credit facility will be redetermined to.
      They are trying to act now, so that if the worst happen (like the last time) they will be as
      ahead of it as they can be.
      The credit facility is expiring the end of next year and the size of their land is large enough,
      so that if ng drilling becomes economical they have enough opportunity for a life time (as
      long as they drill before 2020...).
      anyway, that is my take. I work for a private company that was and still is in a situation like
      this and its part of life. when you need the money, you need to know you will have to sell
      at a discount. how much of a discount is another matter.
      good luck to us and cep.

    • you keep forgetting that for cep raising equity is something they need approval for from the
      owner of the class A shares and 25% of the common shares. today this owner is pstr.
      I doubt they want to be diluted. they are probably waiting for the end of the 3 year wait
      period before they move to try and merge the two together. if ng is still so depressed and
      the oil opportunity does not help them be in a better position, it will be hard to justify a
      separate set of overhead for cep. I hope it does not happen, because cep has managed (
      so far) to play their hand to the maximum.
      Either way, the assets over here are substantially undervalued in comparison to EV of
      $130M. I hope they have the time to prove me right.
      good luck to us.

      • 2 Replies to ofir_menkes
      • Again, you show your lack of knowledge of PostRock. No amount of management overhead synergy can compensate for PostRock's enormous debt load. None.

        CEP's windown of opportunity has likely passed them by. Will they survive, likely, but it is going to be an uphill battle. All of the cheerleaders keep preaching about oil production growth...but where is it? Quarter after quarter we see them average 320 bbl/d. I've seen some folks here making wildly optimistic projections regarding oil production. Management needs to start giving far better info regarding how much money they are investing on oil production. Masking capex by calling it drilling, recompletions and work overs is a joke.

        Annual oil revenues are in the $11 million range. CEP is investing this amount or greater and yet we see no appreciable gain in oil production and continued decline in gas production.

      • rrb, this is not about what I know or do not know about pstr and about how good or bad their
        assets and balance sheet are. its about the possibilities. I know cep and I just hate to think that
        pstr will be able to get cep on the cheap. that is why I am trying to convey how important it is to
        reduce overhead expenses asap at cep and increase capex as much as possible.
        that is my only incentive as a shareholder and should be the only target in front of cep's
        management.
        good luck to us.

 
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