1. What is the processing capacity of the Century Plant?
2. What amount of Natural Gas is being processed thru the plant at present?
3. How much CAPEX would be required to bring production up to capacity?
4. Why are SD and OXY happy (according to Payback) with this situation at present?
I don't have all of the answers, and certainly don't think that question 4 can be answered in a "Happy" way. I do know the answer to question 1, and have a pretty good idea of the answer to question 2. The answer to question 3 is far more difficult, but the number is extremely large.
This quiz is open to all, but I'd sure like to have Payback answer each question individually. Any chance of that happening Payback? Don't just give us some beat around the bush type of answers. Just straight up answers to each question. I'll post my answers in a while after you and the board have had time to digest and respond if there is interest.
Century Plant is processing around 60,000mcfd.
Wells in the Pinon are largely vertical and on average at best IP 2,000mcfd. They do not decline as rapidly as horizontals, let's be liberal and say a 50% decline the first year, a 30% decline the second year and then low teens thereafter.
The wells cost around $2,000,000 to drill. To move production up to 800,000 mcfd would necessitate drilling approximately 600 wells at a cost of $1,200,000,000 at a minimum and require at least 30% of that amount to be reinvested each year to maintain production levels. This figure does not include G&A, Interest or other expenses.
The gas is high in CO2, in the 50% to 60% area. So net methane on 800,000mcfd of total gas would be less than 400,000mcfd at 4 NG that equates to $425,000,000 max that you get back from sales after deducting royalties and taxes the first year. So spending $1 Billion plus only to recapture $425 Million doesn't make sense. NG definitely needs to be higher than 4/mcf for things to work here, but the decline curve is not as steep as on the horizontals. Maybe 5.50 to 6.00 NG would work.
Rough numbers for sure, but the Pinon isn't going to get drilled unless NG really takes off. On the positive side for the WTO, SD found the Owens/Magnolia field, the Kothman field and the Big Canyon Ranch field. These areas are low to no CO2 and the economics are likely much better than the Pinon, but they are still dry gas and will not offset CO2 penalties with the Century Contract, but could offset the pipeline penalties.
Looks like SD is going to be stuck paying both Century Plant and the Pipeline penalties for quite some time. We are talking about $50,000,000 plus in penalties coming down the road and aren't far from that number now. That's about 10 cents per share deducted from EPS.
This concludes the Century Plant Quiz. Longstrong gets an A+. Gman and Divin get a B+. Kiki and Medic get B's along with J.rewing
Payback gets an F. Trmarra gets an I (incomplete) as she did not turn in her assignment. Her grade will be changed to F if she does not complete her assignments.
Looking forward to a Big Beat on earnings tomorrow, and more importantly a good report on the Woodford.
I'm curious where you are hearing the Century Plant is processing around 60,000mcfd?. The last I heard was closer to 200,000 mcfd. but that's been months ago.
Also with respect to if the gas is high in CO2 or not, as long as Sandridge is supply the gas that the plant was designed for that they were off the hook is what I was told. Even if it's pure methane.
Your sources are probably better than mind, but this is what I have been told.
Respectfully I still have a sell order in at 20.00
So with OXY losing some percentage of 50 Mboe/d incremental Permian production and SD suffering persistent but non-fatal penalties and impairments (+ tax credits for processing CO2 I recall), isn't it only logical to believe a mutually beneficial agreement will be worked out? OXY is losing as much #$%$ million per day. Call it just 10% of that and it's over $180 million per year. As you mention, SD may be running at a clip of $50 million year. C'mon OXY, pony up the dough. Financially motivate SD to move. Get this done.
REAL ROUGH PRICING SCENARIO:
IMO...we're talking a minimum 2.00/NG profit premium on exported NG...add another 1.00 for transport/shipping etc.....no, worst case it and say another 2.00/NG total shipping import/export costs etc......for a total 3.5 today + 2.00 profit.....+ 2.00 shipping etc......= 7.5 NG which is HALF what many in Asia and around the world currently pay. Lot of margin for play at 7.50 ....ground to foreign port!
But, lets worst case world costs at 10.00 per NG or even 9.00.....we still come in at 7.5 with a 20% cheaper cost for those paying 9.00!
Thats a huge margin to play with when it comes to competing on price.
If on the otherhand, NG moves to 5.....we lose that 20% margin in the scenario above BUT, rest assured, the driving force behind NG will ultimately be cost to produce and shipping.....don't forget, we are about to become THEE market regarding NG......or so it seems for now! All IMHO !
The cheaper our NG is the fewer competitors we have...again, we will become THEE MARKET.
I know one thing , we shareholders are not the only people bullchitted by Tom and board's "presentaions" and lawsuits were filed over this Century Plant CO2 fiasco a couple of years ago by private oil and gas investors due to substantial misinformation provided by Tom and BOD , but I do not know what has come of it , and I do not know the fines associated , but I will suspect gas delivery is 30% as promised , and wells cost twice as much as predicted ..... and however many wells are there now , SD will need to double that count .....
I don't know the true answers to your questions, assuming the cost of a WTO well costs are comparitive to a Permian well since most are vertical wells.. The Permian wells are not contributing any added productuion to the overall production of SD. However drilling WTO wells will build BOEPD and give an artificial rise in production numbers at the same time not generating the revenue that an Oilier well will produce. When we stopped drilling in the WTO as the production was decreseing we were replacing it with Oiler production in the Ms which still allowed our PPS to deteriate.but revenue rose nicely,during this time. Nat Gas is on the rise my answer to the problem is to move rigs out of the PER and into the WTO when the SD has meet its obligations to the PER Trust. What ever Capex SD is spending on the PER just move it to the WTO whatever these new wells generate will help lower the fines and add production numbers to our bottomline. Hopefully NG prices will rise to make this a profitable conclusion. The added BOEPD may add to a PPS rise ..Just Sayin
The Century Plant provides 675 MMcf per day in available treating capacity. Original reports indicated the Century Plant was expected to have a CO2 takeaway capacity of at least 450 million cubic feet a day. It was expected to allow SandRidge to produce 280 million cubic feet per day of methane from high CO2 gas.
The project hasn't lived-up to the vision. SD has accrued for penalties amounting to between $29.5 and $36 million for 2013, a big increase over the $8.5 million for 2012. Overages resulted in capitalized losses on the construction of the Century Plant of $180 million, including $50.0 million, $25.0 million and $105.0 million for 2012, 2011 and 2010, respectively. In 2012 SD recorded a $79.3 million impairment on it's gas treating plants and CO2 compression facilities in the expectation that the use of these facilities will be substantially limited. SD also determined that the future use of its gas treating plants would be limited and recorded an impairment of $59.7 million in the midstream services segment in the fourth quarter of 2012. In 2011, the Company recorded an impairment of $2.8 million on certain midstream compressor assets. There are lawsuits in the amounts of $45.5 million and $13 million plus punitive damages that were filed related to the endeavor. Fortunately summary judgments went in SD's favor. The Company is party to a gas gathering agreement and an operations and maintenance agreement with Piñon Gathering Company, LLC (“PGC”) related to the Company’s properties located in the Piñon Field in west Texas. Under the gas gathering agreement, the Company has dedicated the Piñon Field acreage for priority gathering services for a period of 20 years and will pay a fee for such services. Further penalties are accruing on this front as a result of under delivery.
I doubt either party is very satisfied with how this has worked out thus far.
Thank You Dr. SigmondStrongs.......Now would you care to come clean. Please state your involvement concerning these desatrious decisions. Please state if you are up to taking responsibility at any level, what - so - ever....Please share your plan to right this wrong. This is where you and your friend Rainbow have not been transparent. What makes you two think you can menapulate SandRidge Energy from this message board. Now I put you to the test. Lets see if you two have what it takes to be stand - up men.....
Happy Payback Himself ; Who Knows What You Two Are Up Too ! ! !
Nice Post Longstrong. I love it when somebody gets on top of these threads with some brains.
I was of the opinion that the overall treating capacity was 800mmcfd which is a little higher than what you stated. Supposedly there where two separate trains with a capacity of 400mmcfd each that were completed at different times. That would put gross capacity of the two Century Plant Trains at 800mmcfd.
Those cost overages, impairments, and lawsuits associated with the Century Plant are incredible and incredibly bad.
But that's not all of the problems that are happening in the Pinon. In addition to the Century Plant Contract, SD sold the pipelines, compression and gathering systems to TCW Asset Management Company for $200,000,000 back in 2009. The pipeline capacity is 400mmcfd and SD according to my calculations is only producing 60,000 vs the 400,000 expected flow. This is the same deal that Longstrong was referring to that is also referred to as "PGC" Pinon Gathering Company. These pipeline contract always carry penalties for lack of delivery. And SD is only delivering 15% of capacity, the penalties for under delivery are easily $10,000,000 per year and likely much higher than that, and this is in addition to the Century Plant problems, yet we here nothing about it. If you add things up the Pinon problems and penalties amount to at least $40,000,000 and are likely going to more than $50,000,000 per year if SD Doesn't start to produce adequate amounts of gas to satisfy these two SEPARATE contracts.
So far on our Quiz we have Longstrong at 675mmcfd capacity for Pinon and Rainbow at 800mmcfd capacity.
Nobody has responded to current production. My estimate is 60mmcfd. Less than 10% of what is needed to fill the Century Plant.
So how much CAPEX would need to be spent to get the Plant up to capacity? Come on guys, let's talk a little Oil and Gas business and forget about these football posts for awhile. Payback and Trmarra, do you guys care to exercise your brains about this? I'll post later and give you my estimates, but would love to see our board "bookies" try to put a pencil to the problem.
Rainbow, Take it some where else. Management is on to your little agenda. Your little game has failed. You are wasting your time , while making a fool of yourselves. You might consider giving your parrot medi a new script......
Happy Payback Himself ; Who knows your little tradury game.......
payqwack, take it somewhere else, we are on to your agenda, your little game has failed, you are wasting our time, you are a fool, u might consider another cl9 id
happy paycwack himself who likes to play cle9 games
a better question for you rainbow.. why try to reason with someone who doesn't have all his marbles?
seriously. do you think this guy has the cognitive ability to really understand your analysis (although i think you are very clearly correct).?