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Santarus, Inc. (SNTS) Message Board

massivad 4 posts  |  Last Activity: Aug 27, 2014 12:04 AM Member since: Jan 16, 2008
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  • massivad massivad Aug 27, 2014 12:04 AM Flag

    Q2'14 results where as good as could be expected given the challenges and issues in the field. There's no excuse for mgmt. taking their eye off field operations. Managing a company this small should be more hands on with lots of oversight as there is very little room for mistakes given the financial metrics the company is operating under. With that said, I don't believe the current stock weakness is related to fundamentals. Apparently, there's a large institutional seller that's weighing on the stock. Once the over-hang is cleared out, I expect the stock to trade back to the $2 level.

    IMO, the Street is now looking for a well articulated growth strategy. Restoring production back to 85% of full capacity will take a couple more quarters IMO. I adjusted my Q3'14 avg. production down to 2,250 Boepd which is slightly more than a 15% sequential Q/Q increase. My year-end target is now 2,600 which assumes the company is able to also grow production 15% in Q4 vs. Q3. To accomplish this, they will have to continue doing workovers and increase the choke on Rocky 3. The latter should easily add some 200-250 Boepd which would pretty much ensure that my 2,600 Boepd target is achieved. I don't see how they can ramp production back above 3,000 Boepd (Q4'12 avg.) this year w/out drilling another horizontal in Q4. I don't understand what the holdup is in drilling Charlie or one of the other prospects? This isn't rocket science and surely mgmt. realizes that with 7-8% of natural decline annually, one well/year will not grow production much less maintain it.

    Summer is not the best time to do a deal what with vacations, federal lease auctions, projects budgeted, etc. Autumn is the best time of the year to try and JV a deal. Finding a partner to drill Goldeneye would be a big step forward in potentially accelerating production growth. Mgmt. can't delay converting their low-risk PUD inventory in hopes of securing a JV partner. Thom guided to four wells for 2014 - so let's get drilling!

    Sentiment: Buy

  • massivad massivad Aug 15, 2014 1:10 PM Flag

    Were you not impressed they had increased production some 35% in just the last six weeks? Thom said there were additional workovers and recompletions that are planned/underway and that there was room to run on production. My guess is the quarter will end closer to 2,800 vs. 2,400 boepd based on current run rate and continued focus on increasing production from legacy wells. Don't forget, there is room to increase the production from Rocky 3 which is currently producing 450 bpd. Given the original flow rates, I don't see why they can't produce this well at north of 600 bpd. The current production rate was a pleasant surprise and is not being reflected in the stock price IMO.

    Despite your suggestion that the NAV argument has been discredited, reserves are what they are and given the substantial discount the stock trades at relative to reserves (est. $7.50/share) there is plenty of running room without becoming over-valued relative to this important metric. For me the biggest disappointment was that management did not commit to drilling a horizontal well in Q4 given the huge success at Rocky 3 and low risk of disappointment. They need to get 2 or three wells permitted ASAP and schedule a rig for November regardless of the outcome for Goldeneye. They need to stay focused on blocking and tackling and drilling. Delays in their drilling program is not good for creating value!

    The need to be at Enercom to get their story better disseminated and hob nob with potential investors/partners. This is the most important conference of the year.

  • massivad massivad Aug 15, 2014 10:45 AM Flag

    Did I hear correctly? 2,662 boepd currently being produced? WOW! Stock should be trading north of $3.00 based on resultant cash flow from this level of production.

  • massivad massivad Aug 15, 2014 3:58 AM Flag

    The important thing to focus on is the sequential Q over Q results and they were good. Oil revs. increased 42.88% and Gas revs. increased 39.72% for a combined total O & G revenue increase of 42.61%. Gas revs. were affected by a 15.60% drop in avg. price from $5.90 in Q1'14 to $4.98 in Q2'14.

    Oil production for Q2'14 was 134,769 Bbls, an increase of 40,522 Bbls over Q1'14 resulting in a 43.0% Q/Q improvement. Gas production for Q2'14 was 253,025 Mcf, an increase of 100,164 Mcf over Q1'14 resulting in a 65.53% improvement. Total production for Q2'14 was 176,940 Boe, an increase of 57,216 Boe over Q1'14 resulting in a 47.79% improvement. The Company exited the qtr. with avg. daily production of 1,944 Boepd up from 1,330 Boepd at the end of Q1, a 46.17% increase. My target was 2,100 Boepd. Run times avg'd. 77% during Q2 (80% during June) versus 75% in 2013.

    Apparently, the extensive recompletion and workover program took longer than anticipated and the recently completed Rocky 3 well along with other wells that produce back to Breton Sound Block 32 facilities were not brought back up to 100% after installation of new 6" flow line. I hope to hear that production has improved some 10-15% over the last 6 wks. My exit rate for the end of Q3'14 is 2,400 Boepd. I look forward to knowing what other improvements/workovers are scheduled for the remainder of Q3 to continue building momentum.

    It appears they have finally gotten their arms around the field personnel and infrastructure issues and Q3'14 should mark the beginning of the turn-around with better results expected during the 2nd half of '14 based on completion of their production optimization initiatives, resumption of drilling in Q'4 (Rocky 2, Charlie), and a better handle on overhead (labor.) Important catalysts include the projected drilling schedule, progress regarding Goldeneye partner, venture partner for Gulf of Mexico property, continued ramp in production and strengthening of natural gas prices into year-end.

    Sentiment: Buy

SNTS
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