Depending on how company report the financial, they report revenue at $100 because that is the price that they sold the physical oil. but in the end, because of financial transactions they only collected the hedge price of $94 or $86 or whatever, they now need to expense the difference between the 2 prices and that creates net loss from hedging. If the physical price of oil is below the hedge price they then report a derivative gain.
To make matter even more confusing there is realized and unrealized gain from hedges. The realized gain is what happen in the past quarter and unrealized is the profit or lost on your future hedges that have not been exercised yet.
Simple terms, if the price of oil is higher than the hedge you lose money. They sold the oil for $100, but could only collect the $94 (hedge price) so they "lost" $6 dollars. Think of this $6 as a cost of doing business, like a transportation charge.
The opposite is they sold oil for $90, but collected $94 (hedge price) so you "gain" $4 dollars.
If by "old man" you mean the founder Henry Goodrich, he passed away this spring. His son Walter "Gil" Goodrich has been CEO since 1995. The other "old man" Patrick Malloy is still the Chairman of the Board.
To be fair, clueless bulls also mess up decline curves. How many times have you read posts where the author takes the IP and multiplies it by 365 to get a production number.
Correctly predicting future (even 3 months) production & revenue numbers for individual wells, especially for wells with less than 3 years of production, are hard to do. That is why analyst even with their models, experience and research have a hard time correctly predicting these numbers for small O&G companies with a limited number of producing wells.
The well results are good but, I don't think you can call them an upside surprise and the market this morning is in a bad mood.
The Company's Bates 25-24H-1 (98% WI) well in Amite County, Mississippi, which was completed with an approximate 4,850 foot lateral and was fracked with 19 stages, achieved a peak 24-hour average production rate of 1,000 barrels of oil equivalent ("BOE") per day, comprised of 938 barrels of oil and 373 Mcf of gas on a 17/64 inch choke.
The Company's CMR/Foster Creek 31-22H-1 (90% WI) well in Wilkinson County, Mississippi, which was completed with an approximate 6,700 foot lateral and was fracked with 24 stages, is in the early stage of flowback, with a current peak 24-hour average production rate to date of approximately 1,140 barrels of oil equivalent ("BOE") per day, comprised of 1,070 barrels of oil and 420 Mcf of gas on a 13/64 inch choke. The Company will provide an update on the well on its third quarter earnings press release.
The CMR well is near HK's area and looks to be a good well, with better IPs number to come as it looks like they rushed the IP release.
EnCana just announced an investor conference call for Monday at 8:00 am and then a media conference call at 9:45 am. You don't do these things, especially the media call, unless you have something BIG to talk about.
Since the media gets their own conference call starting at 9:45am after the market opens, I expect a big merger or they are splitting the company up.
GDP is/was partnered with BlackBush Oil & Gas in some of their Eagle Ford acreage, especially with their Frio acreage. BlackBush Oil & Gas was bought recently by private equity firm Ares Management so it could be BlackBush acreage.
Plus with lower WTI, do we even know exactly what effect it will have on that KKR well "buy-back" program. I could never figure out if XCO is better off with high oil prices now or later and how does oil price volatility change the pricing on those well buyouts.
Personally I would wait until Monday and look at the Nov. options. Goodrich could wait until early Nov. for earning to provide well updates, plus you would also get updates from HK and maybe ECA.
I like the honesty of this post. Too many fools on stocks that are declining say they welcome the decline because they can keep on buying more shares at cheaper prices. But if they are truly buying more & more shares, pretty some they will own only one stock and those folks are either stupid or poor.
Other rumor/expected production from TMS Horizon:
EnCana Pintard 28H-2, located roughly 3 miles north of Centreville off Macedonia Road- Trinidad Rig # 124 finished drill with 20,807' total depth and an approximate lateral length of 8,500'. Plugs drilled out and flow back started. Reports are this will be a good one…expect an IP well in excess of 1,000 barrels of oil per day.
Encana Lyons 35H-2- Located on same site as Lyons 35H-1. Fracturing operations complete on an estimated 5,000 foot lateral. Plugs drilled out. Flow back underway...rumors abound, but most reliable I have heard is this well could easily have a peak production number in excess of 1,200 barrels per day.
Goodrich Bates 25-24H-1, located roughly 2 miles northeast of Liberty off of Hwy 569 North. Fracking successfully completed on 19 of 19 stages in an approximate 5,000 foot lateral. Plugs drilled out and well has begun flow back. I expect an IP of 900+ barrels of oil from this well.
Goodrich Denkmann 33-28H-2, located in Amite County on the Mississippi/Louisiana line in T1N, R4E. Accessed from the Louisiana side through Weyerhaeuser roads off of Tolar Hurst/Parish Road 181 off of Hwy 1044 north of Hwy 38. Well reported to have a peak flow rate of 1,200 barrels of oil per day and a total barrels of oil equivalent (including gas produced) of 1,250.
14 producing wells will not de-risk the TMS. Look at HK's map. They have 72K net acres West of the MS river and so far not 1 well have been an economic success. Then look at Wilkinson County where they have 108,000 net acres and around 50% of this acreage is near the MS river and nobody has drilled any wells in that area. They have a large acreage block in southern E. Feliciana that nobody has even come close to drilling by and finally they have an even bigger block in central W. Feliciana and the only well there is Goodrich's SLC well and the jury is still out on that well. Looking at HK's future plans, I don't see many wells being drilled in these areas.
14 producing wells may prove that the TMS is commercially viable, but that doesn't mean that HK's acreage is de-risked.
And no I am not short HK, but I do believe that people are rushing the TMS.
I said "years" is useless, not the actual inventory. And the ROI is much higher if you could drain a 1,000 acre unit with 6 wells instead of 10 wells. Operators are not only trying to lower well cost, but also increase drainage area per well.
You heard wrong. The TMS is not going to 50 acre spacing, and with longer laterals you use more acreage per well. I don't get why people don't understand that well down spacing is really bad for operators. The fewer wells (less capital) needed to drain the acreage of oil the better.
The years of inventory is really a useless number, because with little available drilling capital it could be a 1,000 years or 10 years with a lot of drilling capital. Case in point, if you believe that they have 6,000 drilling locations in the TMS, where are they or who ever buys them going to get $66 Billion in todays dollars to drill all those wells.
Lets not forget, JV rumors are also a remote possibility. This stock really does have a relative small float for the number of shares traded and the stock price can really move when institutions try to move into or out of the stock.
One major difference between the Eagle Ford and the TMS is that drilling in the Eagle Ford is like 1st grade while drilling in the TMS is like high school. All these drilling issues in the TMS are not only caused by it being a new play, but that the play is harder to drill.
I don't understand why Halcon's stock price moves so much based on early TMS wells as to me it has a very nice foundation, with its other 2 plays.
This not a sale. The second line of the news release. There is a big difference between marketing a property and a completed sale.
"Amelia Resources announced today that it has been retained as a technical consultant to market 50,000 net acres of newly acquired leases in the Tuscaloosa Marine Shale (TMS) play."