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Constellation Energy Partners, Ltd. Şti. Message Board

  • rrb1981 rrb1981 Feb 11, 2013 9:13 PM Flag

    Conference Call

    Should be interesting to hear the call.

    They have divested the low decline Alabama assets. I think the bankers will require virtually all of this cash to be used to pay down the revolver. It appears that the bankers are not as optimistic and perhaps they more or less told CEP that it would be cut drastically.

    The deal leaves CEP with ~$22 million in debt. A far cry from where they were a few years ago, but then again, CEP's production has plummeted from lack of investment and from the pending divestiture.

    The cbm Osage Concession isn't worthless, but CEP won't be drilling new gas wells on this acreage. They may do the typical work-overs and recompletions...but the payback on these wells is horrible.

    They have to focus all of their capital on oil production growth. I think they will have a very modest drilling budget in '13, with the banks once again pressing CEP to pay down $4-$5 million of the $22 million, leaving the remainder for drilling.

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    • if you take $63M - closing fees + $7M for hedges unneeded anymore = $67M
      than $84M - $67M debt = $17M debt.
      At the cash flow of the part of production that is left, the company will have a very strong unlevered cash flow (the sold part was 4BCF/year * $5 = $22M of revenue).
      The parts left are 6.5BCF/year * $5 = $33M + oil (assume 120,000 barrels in 2012 and 200,000
      barrels in 2013 = $12M in 2012, $18M in 2013) = $45M revenue of current revenue stream and in
      2013 assume 10% decline of ng production and $18M oil revenues = $47M revenues in 2013, which
      (assuming $25M operating expenses) will yield $22M cash in order to do capex and pay down
      some debt ($16M capex for sake of argument and $6M for debt - including $1M interest).

    • The payback on work-overs and recompletions is not horrible, especially when you target oil.
      It is a low production for low investment - and high ROI.
      At $80+ per barrel the ROI is actually quite strong if you target oil. on gas the work-out ROI is not bad, but it is no competition for oil. we will be much smarter after we see the results of the 55
      recompletions + wells of q3 (in progress as of 9/30/12).
      good luck.