Thanks Nawar for your insight. If the stock does not go up as you hope, would you be interested in forming a group to pressure mgmt. to sell the assets? I have owned Enterra since 2006, what a disaster!
Yes Gary; if management fails to monetize the Mississippian properly; I would be interested in pressuring the management; as a matter of fact, I would be interested in significantly increasing my ownership (possibly to 2%-3%) from just over 0.5% currently in order to have a large enough block along with other interested shareholders to press for a strategic option.
The impression I have is they are going for a JV or a farm out; I doubt that they will sell the acreage; my guess they want to increase production; and having a JV partner to finance drilling or a farm our agreement will lead to a significant increase in production, without the need for the company to inject any capital.
Based on my research their acreage could support 100+ locations; SD is reporting 96% IRR in the play, 456K EUR and $5.6m NPV per location; at 100 locations we are looking at potential $560m value that can be created; if they get a partner to shoulder the drilling costs for at least the initial stages of the development, enormous shareholder value will be created.
If the land is worth $60m to $80m, a partner would need to invest that same amount to match EQU contribution; with such an amount 20 to 26 locations could be drilled (based on SD costs of 3m per location); this means a quarter of the potential locations could be developed before the need for EQU to invest any funds in the play; 20 to 26 locations will create $112m to $146m in NPV, at 50% EQU share that would be $56m to $73m net to EQU; and this would still leave 80% to 75% of the play to develop.
At $140m marketcap, the Mississippian deal will be truly game changing for the company.