Medic, we all would like see how the ROR is calculated. SD management has thrown out figures all across the board and at times stated it as IRR (Internal Rate of Return). There is a significant difference between ROR and IRR calculation. I had a conversation with Kevin White (Investor Relations) over a year ago in this regard. He was a bit evasive but did tell me that SD would not get their money back on the wells they were drilling within a year. I've got a MBA in Finance and don't much care for obscure calculations. Would far prefer if SD would keep it simple and say if we spend 3 mill on a well we will recover that money within 1 year or 2 years or whatever. Also there is the all in cost involving corporate overhead, debt service, and other expenses. It would be nice to see transparency on how long it takes to get a buck back on your all in CAPEX expenditures
with every other corporate expenses included. Unfortunately, that is not how the game is played, and certainly not the way SD has played the game. There are other companies that do state the number of months that it takes to get back the cost of drilling recouped, but SD has never done so.
You can do some rough calculations based on Boed flow on 3.2 million cost of a well. Subtract out Royalties, and taxes of 30% and the well would only have to flow an average of 68 boed for the first year to recoup the drilling cost at $90 oil. I'd sure like to see the average flow stated on a yearly basis for the first 12 months that SD has had their wells flowing. And follow that up with operating costs of the well including ESP's, utility, and transport costs. Just the basics of what it costs to produce and sell it. Corporate overhead will vary, but should not be too difficult to calculate.
With close to 2 Million Acres to play with. SD won't run out of drill sites anytime soon. Singh thinks 700k acres are prime for drilling. That's over 4,000 wells on 4 wells per section spacing. A mere 12 Billion to drill them out in the next 10 years or so. SD is good to go, all this negative press will be worked thru in the next qtr or two. And with the drastic reduction in overhead earnings will come on strong.
Thanks for posting the latest completions. I agree they are decent numbers. The cost per well is expected to be below 3 million per well (by end of year) so that will significantly help ROR in the Miss even with the somewhat less than stellar results versus expectations. I think as they continue to drill the cost of wells will continue to go down and they become better at finding more productive wells.