I am not wishing for more SD Permian exposure. In my view, as oil prices fall (due to increasing supply) I don't want SD invested in the very costly wells of the Permian. Yes, the oil is there, but it isn't cheap to produce. $85/oil will be harder on the profitability of Permian wells than it will be on the lower cost wells in the Miss.
Don't worry. They won't get more exposure to the Permian. They'll finish drilling the trust out and move the rigs. Their Permian wells were actually less expensive to drill verticals. The yields were much lower but much more oily.
There have been no permits for drilling the WTO - Pecos and Terrell Counties in over 2 years. The Permian Rigs are only drilling the PER Trust. Once the Trusts are drilled out the overall ROR on wells drilled for SD commons goes up. Trusts should be totally drilled out by 2Q 2013, if not before. CAPEX deployed to SD proper or wholly owned wells produces much better Cash Flow to SD commons shareholders as the WI is much higher.
SD has the ability to liquidate their restricted shares in the Trusts 12 months after drilling obligations have been completed in order to fund future CAPEX or reduce the Debt.
The loudest noise was WTI breaking below $100....but that's OK....the spread between WTI and Brent is back to being near $10 that will just equate to more US oil leaving the gulf ports...the herd runs for two reasons...they either run for what they think is greener grass...or they run from fear....today sub $100 oil was fear and they ran. This price action is macro....any oil company that is nearly fully hedged is not impacted...but fear rules. GLTA