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clock Created with Sketch. 20/02/15
18:14
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Originally posted by cmonaussie
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EOG also entering 2015 "hot" (like PXD, APA and SSN) which a back log of about 200 completions."Would $60 crude be sufficient for you to start wanting to work that down or perhaps that in combination with some other factors on completion cost or that sort of thing can you just elaborate a bit how your thinking about it. " " Bill Thomas (Chairman, CEO): Certainly because we are deferring these completions because we do believe that prices will be better in the future and even a $10 increase in oil price gives us a significant additional return on our investment and NPV upside. Really our rate of return focus on our capital on return focus is really what's driving the deferral. Let me kind of walk you through. There's two parts of this deferral. One is as Gary said we're starting out 2015 with about 200 uncompleted wells in our inventory. That uncompleted well inventory will grow throughout 2015. And if oil prices improve and they look something like the forward curve in the $60 range than we would begin completing many of those wells starting in the third quarter of 2015. And that would reflect additional growth in the fourth quarter, heading into 2016. So we want to head into 2016 on an uptick in production growth. So our curve in 2015 would be U-shaped. It would be the lowest production will be in the second quarter and in the third quarter and then production will begin to increase in the fourth quarter as we head into 2016. Then at the end of the year we will have about 285 wells in inventory to start the 2016 process. That will give us a bit of an advantage as we go into 2016 and will be able to grow oil at very strong double-digit rates and be able to stay free cash flow neutral in a 625 dollar oil price environment. Hopefully that gives you more understanding of what were thinking."
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What concerns me cmonaussie is that I don't think ssn has enough revenue coming in to even pay its admin costs let alone borrowings and interest. At some stage the cash will run out particularly, with the low production rate and the low POO, even accounting for hedging (which also has a finite date).
