Only issue on Cane Creek is it will chew up additional green stuff (and I don't mean grass) which is in scare supply.
I read through the Qtrly but will wait for the 10Q and hopefully a closing on the OAS deal and what should be a proforma to be supplied (if only because effective date of sale becomes Oct 1, 2015 I believe). Most of the datapoints are within reason to my own estimates (and I note SSN continues to become more "gassy" - but they view is more formed from what is sold ... ergo probably less gas flared and more sold).
The cash position is slightly better than my assumption of $4M beginning 2016 (remembering I put up that MOB funds to $39M so add $20M to the fully drawn $19M and then subtract $16.5M to add $3.5M to what I was estimating as only $500K in cash left)
What Alacrity is saying "Getting the green light is not only about what oil is at today it's about the expectation of what it'll be in the years to come." is indeed what it is about. That's why I put the "SSN transformed" post up. Have to remain forward looking and risk/stress test the forward assumptions.
Just as SSN put out the acquisition value of the OAS properties at stressed strip pricing, so too will MOB apply that to SSN existing producing assets. That knife cuts both ways. MOB needs to have a cushion in the value of the collateral put up for that $39M. For simple math lets assume roughly 20% cushion. Implies SSN needs $50M of PDP assets. Is NS valued at $33.5M if OAS acres are $16.5M? Both produce roughly the same amount.
That's not a trick question. MOB would also be asking themselves why they are taking on the lion's share of the capital risk (e.g. why did OAS (need to) do a capital raising). But as I've said before, by not funding they are almost certainly risking their $19M as the current Qtrly doesn't show the business in its existing form can repay them.
SSN needs MOB to be risk takers (they are a bank not a fund) and see that for SSN this deal is transforming and with (slowly) rising oil prices MOB as a lender stands a better chance of repayment over time.
PS. Don't think avg $50 oil is on the cards for 2016 or even maybe 2017.
GFTA
SSN Price at posting:
0.4¢ Sentiment: None Disclosure: Not Held
