They struck out on their first three eagleford wells - that is why they were lucky Dan Hughes discovered the buda because they could switch from non economic eagleford wells (about the only ones in Texas) to the most economic wells anywhere (the cheaper naturally fracked buda wells that their partner(s) are pumping out)
When do you expect the Novemeber production numbers to be posted. Do they report on the same day every month? (as in - release all the Nov data on the 20th of December or something like that? Do they update al the wells on the same day or do they come in randomly?
They may have to take some losses selling their gas at current hedges. Watch the withdrawal numers tomorrow and next week and the impact on nat gas pricing.
Corridor is a little New Brunswick company that produces less than 10 MMCF/day and sells it into the same pipeline supplying New England. Here is what they have arranged for Q1 forward sales. Do you think ECA can make soem money selling 300 MMCF/day to New England right now?
Corridor Resources Inc. ("Corridor") (CDH.TO) announced today that it has entered into a forward sale agreement for the period January 1, 2014 to February 28, 2014 for an average of 2,370 mmbtu per day of natural gas (approximately 2.2 mmscf per day). This sale is at an average price of $US15.48/mmbtu, resulting in a netback of approximately $CAD12.50/mscf. This sale, combined with the previous forward sale announced on October 22, 2013, covers approximately 55% of Corridor's estimated production for the first quarter of 2014. Corridor's remaining production will be sold at daily market prices which are expected to be strong during this period due to the high basis differential in the New England markets.
"This additional forward sale agreement further demonstrates the exceptional premiums that Corridor's production can obtain during peaking periods, and on a yearly average basis, in the New England market. This forward sale agreement will result in strong cash flow from operations for Corridor's first quarter of 2014" said Phillip Knoll, President and CEO of Corridor.
But it is still money they can use to pay down debt, grow the business, and pay the 7 cent dividend. The costs have been spread out over the last 10 years as the project dragged on. There will even be some favorable tax consequences to having the depreciation. It is much better to have that past investment finally pay off nicely than to have wasted it.
That is a nice new well. The paradox basin wells can be very prolific and several have produced more than a million barrels. Others have not done well at all. Hopefully they can find a way to drill consistently good wells - there are a number of oil zones interspersed in the salt and they can sometimes be very hard to produce. The cane creek interval is a lower one and has been productive in soem of the good wells.
Actually the Dec dividend was still at the old rate of 8 cents per month. That is more like 18.6% and the new rate of 4 cents a month is an annual return of 9.3%.
300 mmcf is 300,000 MCF, right now over $10 per MCF. Supply cost is $2-3/MCF. Using the higher estimate they make $300,000 a day at $4 gas, $600,000 a day at $5 gas, and $2.1 million a day at $10 gas.
That equates to $110 million a year at $4 gas, $220 million a year at $5 gas, and $750 million a year if they would get $10 the whole year. They won't get that, but they will likely average over $5 if this is a long winter.
Thats sets the stage for increase to 25 cents next December to get back to a buck a year. Every year, second Friday, we get get a raise. Pattern will continue year after year after year.
The most important number is how many wells are drilled in 12 months. That will set the amount of new production being added from the buda. After that, each new well will mostly replace the production of the oldest well dropping off, adding only a little incremental production). Production would go up if number of wells being drilled increases every 12 months). With either scenario, eventually well locations are used up and the production decline is pretty steep in the next 12 months (no drilling, a lot of profit, but rapidly declining production to some much lower annuity level).
Right now they have room to run for 3-4 years at the rate they achieve in 12 months. (I would throw away buda because there was a long gap between that one and buda 2). Start the clock at onset of buda 2 production and see what is achieved in 12 months. From that point on it will be holding the production gains and looking to future opportunities. But there is a 3-4 year period with much higher productions and high profitablity because ythe wells are highly economic. In that 3-4 years there is lots of time for moly mine, uranium royalties, new plans on the texas acres, new oppoertunities. Let's just hope they take a breath and take advantage of this window of growth and profits and don't make dumb mistakes and pee the money away.
they hope to do something in 2015. They need more than a permit. They need a partner (to pay for it). There is a lot of environmental opposition. Still it is one heck of a structure.