Yes of course. Up to a point the differential is somewhat of a %. of WTI. The higher WTI the higher the differential it seems. Also very dependent on rail capacity (for a pipeline once the capacity is committed there's nothing left to give) and direction.
WTI and N. Texas: $25.89 & WB Mixed Sweet: $19.17 ==> differential of $6.72 (I used a $7.50 differential for 2016 and $5.00 2017 onwards). The good news is I think the contraction in the differential is here to stay.
The other things the bank has to take into account is the SEC PV10 for example DOES NOT take into account the company's G&A expense nor any expenses that are above the field level expense (the differential should have been taken into account). What does that mean? Well if one makes an assumption that 50% of a company's reported G&A is used to produce the PDP and the other half is is t produce the "growth" ... a fair assumption if we are looking at companies like CLR, EOG, COP, etc then you need to make some adjustments to this PV10 value.
So now you have a tough question to answer ... what % of SSN's reported G&A expense do you want to allocate to the SEC PV10 value (the reality is the oil and gas do not produce themselves). This is what makes it tough on smaller companies.
This is what MOB has to do though. While it may well be that the SEC PV10 of the OAS assets to be acquired is $16.5M what amount should the G&A expense be?
To your other question on Rainbow and Hawk Springs ... no idea. I think $0 for Hawk Springs (no Reserves and at best prospective exploration) and Rainbow would be PDP/PUD measured.
SSN Price at posting:
0.4¢ Sentiment: None Disclosure: Not Held
