I did. But don't read too much into that - at present I see it...

I did. But don't read too much into that - at present I see it as short term position as I haven't done enough research on the longer term investment horizon.... which I will do.

Maybe Terry is reading HC again after all. He has definitely addressed Hedging (3f & and 8 from "initial thoughts) and started to address the execution plan. That's for a later post.

OK... so the hedging strategy .... about bloody time Terry, about bloody time!

1. Ignoring the gas hedges as they are not all that significant. Plus don't remember what the BTU content is for SSN gas but it is fairly rich in that 1Mcf > 1.028 Btu. I recall it may be around 1.2 so all that means is we hedged about 160Mmcf (or 192MmBTU)

2. Oil Collar. So its about 6,145 BO per month (24 months from May'16 to Apr'18 and assuming equal amounts per month). Or approx 205 bopd.

3. The cost of this hedge is deferred but will cost approx $3.39/Bbl when settled.

4. If oil trades above $41.50 but below $63/Bbl then SSN will realize the index price. Anything below $41.50 then SSN will realize $41.5o regardless of price. If by magic oil trades above $63/Bbl (and I hope it does) then SSN will still only realize $63.00 no matter how high it goes.

5. SSN is not a hedge trader ... good they have an advisor to help with that aspect. I wouldn't be too concerned though.

6. Just looking at remainder of 2016, another 8 months of costless swaps. Personally these are my preferred hedges. Its a simple "swap" of cash flows. So 14,240 bo (or 475bopd) are swapped each month at $41.20 at no cost to SSN.

7. That looks to me as 680 bopd are hedged ... assume this is all from FB. SSN is saying 75% of production is hedged. The gas hedge works out to approx 111 Boepd. If I add that to the oil I get 205+475+111 = 791 boepd hedged (75%) means total production comes to 1,055 boepd at present. Hmmm? Have I made an error (expect it to be higher) because this is total company production now (FB + NS/R).

Reason being the Jan 6th annc says current production from FB is 720 bopd. (@75% that alone would be 540 bopd)

8. Overall it is great to read SSN talking "my language". Finally they speak about capital efficiency driving their decisions!!! Hooray for TB!.

9. Round 1 will cost ~$220K (avg $20K/well x 11 wells) for 200 bopd. I have to do more spreadsheet work but if SSN cash margin was say $2.75 Bbl then after a well has produced 7,275 Bbls it has paid back the capital. Currently Rd1 is projecting 200bopd for all 11 wells. Thus 18 bopd/well would mean approx 404 days (13.5 months) to repay.

Not bad and especially not bad since it I'm using fairly conservative numbers.


We'll see how this punt pays off. Might have to do a little more research and write up some objective posts.

GFTA