Ann: Status of Foreman Butte Acquisition, page-4

Here's my quick synopsis of the update, in absent the 10-Q, Pro-forma and complete Reserves Report.

I actually think it is a very positive update. Highlight reel:

1. MOB will go ahead ..."Samson currently expects that the necessary financing will be obtained on or before February 29th, 2016, and that the seller will close the sale on that date"

2. What changed their mind? IMO the positive change in Reserves. That may be a surprise since the 1P Reserves being acquired has actually gone down BUT IMPORTANTLY AND WHY IT'S POSITIVE is that the PDP + PDNP has gone up substantially. The PUD has gone down but don't ever forget that PUD requires additional development capital.

3. IMO MOB has also been convinced (by SSN & NSA) that the strategy of going after the PDNP now (in this low price environment) makes the deal work. This is what I was referring to in the Production Capital Intensity/Efficiency row in that big spreadsheet of SSN Transformed. I believe the contained statement explicitly makes the reference (my bold) "The revised reserve report includes consideration of additional workover and stimulation activities of the PNDP inventory. This category of reserve has a very effective capital efficiency because the activity is relatively in expensive given that it is using existing well bores. "   (They mean "inexpensive").

4. For all the oil price recovery bulls, the referenced NYMEX forward strip reinforces the pricing models I've been using - might even be tempted to throttle them back a little more.

5. While the PUDs being revised downwards is (minor) negative, the hydrocarbons remain - just not economic at this pricepoint.

6. SSN can take immediate advantage of lower costs - they have well contract proposals in hand.

So I make it about $34M of new 1P (PDP+PDNP).  Even with tighter lending controls IMO MOB would lend 60% ... ~$20.5M (so that's the $16.5M to buy and $4M for development capital). Maybe they go a little higher than 60% and I think the existing SSN reserves may be upside down (i.e.  MOB has lent $19M against an asset that is less than $19M now).

GFTA