"very technical". reserve impairments never reverse for GAAP if prices go back up. how do you do reserve based lending in the future using the balance sheet assuming prices go way up? VNRs reserves can never be better than 50 oil and 3~ gas without buying new properties. I am really just asking because I want to know. Raw Energy and other perma-bears always avoid the question. What do the banks do when oil is $65 and the company still has negative equity because of silly accounting rules?
I hope it is less. I hope they totally surprise everyone. They extended the date until after the close of scoop/stack. I bet they have been doing their homework and have a bunch of all cash deals lined up to present to them. Agree to hedge 2017 oil at $55 or so and not pay a distribution until debt is at X level and let us use the $280 million to buy these oil fields.
I have asked you this before, but why does a WTI covenant calculation of $74 have any relevance with this company? The production is 80% natural gas and natural gas liquids. 60%~ of 2017 gas is hedged at 3.6ish. Why do you continue to leave out the largest driver of this stock? You seem to be an intelligent person and because I believe that I tend to think you have other motives.
No. They currently have 113 left. When base is re-determined, they will have a small deficiency. I think we all knew this was likely when they released the Scoop/Stack pro forma and had the sales price the same as the reserves.
Things that jumped out to me:
1. Went from 49% hedged to 67% in 2017 on natural gas. $3.75 I believe.
2. Still making good progress on cost per mcfe. Quick calculation of $2.6 for cash only costs.
3. A little concerning that production was down 8% qtr over qtr. I am assuming they shut in a bunch of wells to get cost down.
2017 & 18 futures are almost to the point where they could hedge above cost of production. If we could just get a short squeeze to 2.25 this week, the bank might make them do it.
Lowest rig count in the history of rig counts. Eagle Ford probably has the most associated gas of any of the big shale oil plays, and it is getting dominated even more than the other plays. SWN, CHK drilling plans are zero for 2016. It could be another mild summer and then VNR is in a really tough spot, but I think it is more likely that it gets to $2.50 or higher pretty soon. Then they can hedge 2017 over their costs. By 2018, I am assuming oil prices could be double what they are now.
Not looking at revenue. Looking at production on an mcfe basis. The market does too. LGCY goes up and down with dry gas price. Most of the production cost is dry gas (because most of their production is gas). Therefore to break even or not depends on covering production costs on an MCFE basis which means gas needs to go up.
You mean some dude put an article on seeking alpha. It is a dry gas company, mainly. Any calculation of a breakeven would need to include a natural gas price and an oil price. Their break even is helped more by gas prices than oil prices because the majority of their production is gas.
I agree. If it can just get to 2.50 sometime this summer. Hopefully the bank would make them hedge over $3 for 2017 & 18 and the bonds would essentially become risk free.