SD eaarnings are out . discussion about the MS lime
This should bode well for MPO..don
Mississippian Play. During the fourth quarter of 2012, SandRidge drilled 125 horizontal wells: 85 in Oklahoma and 40 in Kansas. This brings the total horizontal wells drilled during 2012 to 396 wells. Additionally, SandRidge drilled eight disposal wells in the fourth quarter for a total of 60 disposal wells in 2012. To date, over 1,500 horizontal wells have been drilled in the Mississippian play, including 682 drilled by SandRidge. The company exited the year with 33 rigs operating in the play: 24 drilling horizontal wells in Oklahoma, eight drilling horizontal wells in Kansas and one drilling disposal wells.
Mississippian Quarterly Production Grew to 35.9 MBoe per Day, a 19% Increase from the Previous Period and a 131% Increase over the Fourth Quarter of 2011
Record Oil and Total Production of 18.0 MMBbls and 33.6 MMBoe in 2012
Total Proved Reserve Growth of 20% and Reserve Replacement of 454%
Closes Sale of Permian Basin Assets for $2.6 Billion
Updates 2013 Guidance, Giving Effect to the Permian Divestiture
- Estimated Total Production of 34.3 MMBoe
- Estimated Mississippian Production of 17.4 MMBoe, 72% Growth
- Reaffirms Planned Capital Expenditures of $1.75 Billion
We drilled 10 wells in the fourth quarter, with 30-day production average above 800 barrels of oil equivalent per day. These wells were located in Alfalfa, Grant, and Woods Counties, Oklahoma. Of these 10, five were above 1,000 barrels of oil equivalent per day, and our best well was above 1,500 barrels of oil equivalent per day for the 30-day average. These 10 wells produced an average of 68% oil. We did not break out the liquids stream until after the start of 2013.
Went through the SD conf call, looks like the Miss is a viable play, but only 30% oil. Seems they now have several hundred wells to base a type curve on, 60 to 70% liquids. They originally said 300 to 500mboe.
The reduction in the EURs is on the tail end of the curve, out more than 5 years, really doesn't change the returns that much, and the sub pumps accelerate the production and move the IRRs from 50 to 80%.
Not sure I would buy into anything that Ward runs, their pres I think is a good read for MPO. When they say 68% oil, that was liquids total before this year. The best wells seem so far to near MPO's position. Maybe the biggest winner could be ATLS/APL, they have rights to gas processing for 11 counties in SD's acitivity. They could be building a lot of capacity if it's a more gassy play. And the SWD aspect of it is huge, SD has the capacity to inject 1.6mm barrels of water per day currently. And they might MLP that asset, seems APL could maybe have an opportunity there. SD says the Miss covers 20mm acres, and the infrastructure, SWD and electrical is important to returns, the LOE has gone from $13 to $8. The infrastructure is a big part of the play and they have it already. At the current price, $4.7 B EV, less royalty units and offshore, they claim the PV10 of offshore is $1.4 billion, you get a value that could be as low as $1000 per acre. And they have enough cash, only $1.5 B net debt now, to fund drilling through '14. I don't see much risk on the downside. Buy APL.
Going to leave SD, but looked at a gross number, if they drill 580 wells at $3mm, $1.74 Billion, compares to their capex guidance, 214 million bls added, cost of $8 per barrel. If the PV is worth $12 per barrel, they have added $4 per barrel of value, $4 x 214mm bls, $828mm/583mm shs, is $1.40 per share of value added. That's a 25% increase in value at $5.40 current price. But the bottom line, this is more of a gas/liquids play, but the 30% oil makes it work, plus the low finding costs. They did say the Miss, 20 mm acres., that's 125,000 wells to be drilled for the industry. Still think playing the MLP gas processing side would be an easier way to make money, and you don't have to worry about Ward.
Don, looked at the pres without narrative, there are some funny numbers, they revised the type curves from Nov. Seems EURs went down from 433mboe to 369mboe, oil from 35 to 29%, although liquids went up from 35% to 45%. And they talk about ESP wells, have no idea what those are. Good news is costs are down to $3 mm. Claim 50% returns at $100 oil and $4.25 gas, that's good but oil is lower and gas is a lot lower. They are drillilng 600 wells this year, capex of $1.75 B. Looks like the Miss is turning into a liquids play vs oil. One good comment, mentioned Atals contract, they are processing the gas for them. They will do about the same production this year as last with the Permian gone. Will be interesting to see how the market responds, the gassy nature of the play, seems they should have known this in November, I wouldn't trust these guys for a minute. But this does reflect what RRC was saying about more gas.
The SD data bolsters APL's value that I mentioned earlier. SD will drill 600 wells in the Miss Lime this year. Seems that APL will do well if SD continues fo drill at that pace, even if SD is not a great investment.