It's simplistic to call the wells either "economic" or "uneconomic". A well only has to produce approximately 200,000 barrels of oil to pay pack the drilling cost after royalties and taxes are subtracted out. So even the last two announced wells should easily pay back their drilling costs within a few years and then start to make profits for the company. So they are not going to lose money on the last two wells--they're not dry holes. The question is where are the best areas to drill with the highest return on investment. That's what they're going to find out and it will take some time. But even if they can only produce at least 500M barrels of oil per well on just 150,000 acres, the TMS will be a home run for this company. That's why they acquired much more than 150,000 acres--to increase the odds of hitting that home run.
Most likely, the decline in production in Texas is because they have shifted most of their capital spending into the TMS in Mississippi and Louisiana, and the shift in capex started in the second half of 2013.
Interesting data. Any ideas on why production went up in May? Did they open up the choke slightly? In any event, it's good news.
Looks like normal profit-taking to me--mainly guys selling the good news from the TMS. Also, the S&P 500 index ran into some resistance today and then dropped back on news from Iraq. I don't put any weight on rumors posted on the internet.
A number of oil stocks gave back most of their gains late in the day. Still, the XOP exchange-trade fund was up 1.33% today even through XOM was down today. Interestingly, three of the oil stocks that did the best have major positions in the TMS: HK +4.8%, GDP +3.8%, CRK +2.6%. So it seems like HK's gains may have been driven by optimism about the TMS in addition to the oil rally.
Don't forget that HK has a lot of debt, and that limits the upside potential in the stock. But if we continue to see strong results in all three core areas, this stock is going to 10 within the next 12 months. I bought back in at 5.03 and 5.82.
I think it's a good deal for HK, considering the TMS has not yet been fully de-risked. This kind of financing is much better than a secondary stock offering below $6. But the stock is up today because of instability in Iraq and a rally in the oil market, not because of this financing deal. As we saw yesterday, the market views the financing deal as reasonably good and not a reason to sell the stock.
So far the TMS has been highly productive. Goodrich bought that TMS acreage from Devon at a great price.
This well is likely to ultimately produce over 500,000 barrels of oil. At $100 per barrel, that's over $50 million in revenue. That's a good solid return on the investment of approximately $13 million in drilling costs.
This new well has a good solid IP rate, and it's almost entirely black oil. But the EUR is more important than the IP rate, and GDP's other good TMS wells are tracking towards very strong EURs. The well costs should decline steadily as they optimize the drilling process and figure out ways to drill the wells faster and more efficiently. All in all, this is really good news today and I think this stock has a realistic chance to reach 50 before the end of this year.
I was out of HK for months, and bought back in at 5.02 a few weeks ago, then added more at 5.82 on Monday. Seems like success in the TMS could push this stock to $8 or more if the overall market doesn't have a major correction.
If I was short, which I'm not, I'd be looking to cover tomorrow on any kind of a dip when some Wall St. traders take profits before they take off for some vacation time in the Hamptons. HK does have a lot of debt, and at this stock price HK needs a substantial success in the TMS to push the stock higher, but I think HK is going to have a substantial success in the TMS. Also, I would expect HK to acquire new acreage in other oil plays in the US, so there will probably be more successful new oil plays for HK in addition to the TMS. (Footnore: for years I thought the Hamptons was a sub-section of the Adirondack mountains, but actually the Hamptons refers to a couple of golf towns out on Long Island....shows what Arizonans know about NY geography....lol).
Today's action has the look of hit-and-run short selling by hedge funds. When they didn't see much buying in response to the earnings report, they started shorting it while other guys took profits. I still think this stock has massive long-term upside potential and a realistic chance of doubling from here in the next few years.
Good News. Halcon needs success in the TMS to thread that financial needle.
If Day = "Sat" and Time = 9PM and Moon.Out Then
// "...gonna dance to a band from Lousiann' tonight."
LNKD is overvalued, and I think eventually it will fall under $100. The valuation is extreme to the upside right now. But you have to remember that stocks trade more on incremental changes in the company's outlook than on valuation. So if there's some good news and an incremental improvement in the long-term outlook for LNKD, then it could rally first before it eventually falls. It could even rally for a few years before it falls. So you have to pay close attention to the recent news and the incremental changes in the business outlook. That drives the price more than long-term valuation. I'm watching for a incremental decline in the long-term outlook before going short.
I doubt that market makers are naked shorting IDRA. That's not really in their best interests. I think one thing going on here is liquidation of shares in biotech ETFs. That is probably dumping a lot of shares into the market, but it won't continue forever. IDRA and other low-priced biotechs look really oversold now and ready for a short-covering bounce fairly soon. But I wouldn't be in any hurry to buy them. There probably will be at least two retests of the lows in biotech indexes later this Spring and Summer. This Summer should be a great opportunity to load up on biotech and pharmaceutical stocks for a major rally next Fall.
I really don't understand why there's so much short interest in GDP. A short position in this stock just sets people up to get crushed by good drilling results in the TMS. The TMS is a challenging place to drill for oil, but eventually the E&P companies are going to figure out how to get consistently good results in the TMS. This is a dumb short with great risk of big losses.
Goodrich reported on the Blades well this morning:
"HOUSTON, April 14, 2014 /PRNewswire/ -- Goodrich Petroleum Corporation (GDP) today announced the completion of its Blades 33H-1 (66.7% WI) well in Tangipahoa Parish, Louisiana. The well has achieved a peak 24-hour average production rate to date of 1,270 barrels of oil equivalent ("BOE") per day, comprised of 1,250 barrels of oil and 115 Mcf of gas on a 14/64 inch choke from an approximate 5,000 foot lateral. The well landed in the Company's lower target, was drilled and completed under budget and was fracked with 20 stages using composite plugs that were drilled out prior to flow back. The Company's completion methodology was slightly modified from previously completed wells. The well was drilled on a portion of the 185,000 net acres acquired in August 2013 and is approximately 48 miles southeast from the Company operated Crosby 12H-1 well in Wilkinson County, Mississippi and five miles east of a horizontal well previously drilled on the acquired acreage."