Hi Rob, I'd agree with the ASX comment, but most of my...

Hi Rob,

I'd agree with the ASX comment, but most of my commentary is focused on US shale players. SSN certainly far better than NSE or AKK for example.

Just on the accounting question I raised re current ratio - do you know if that is correct?

I was reading a review and it made the following reflection (discussing the 90% SP drop of many US shalers) and noted these factors have likely contributed:

1. Relatively high debt level;
2. Significantly weaker hedges going into 2016;
3. Stagnant production growth despite heavy outspending, which raises concerns with regard to the company's asset productivity;
4. Uncertainty with regard to acreage size that falls within the play's sweet spot.

For those going to the shareholder (investor?) meeting the above 4 factors could be good discussion for SSN.

(A) Relatively high debt level:
OK - relative to what? We do know that relative to EBITDAX it is high (certainly been higher than 3.5x for two out of last 3 Qtrs at least). It is NOT HIGH relative to Interest Coverage. I also have a new metric for you - Debt/flowing barrel. Works just like EV/flowing barrel.

How would TB discuss SSN in this respect. Given (as I understand it) that the debt facility becomes "current debt" in Jan'16, does this cause any concerns


(B) Weaker hedges into 2016:
Clearly with current low oil price the opportunity for reasonable hedges are slim (& none IMO). So the hedge price itself is now lower. "Weak hedging" I believe would be anything that is 40% or less of production at a (realized) price that generates 20% IRR.

How would TB discuss SSN in this respect. What % of production is hedged. Will that production generate the minimum desired 20% IRR?


(C) Production Growth:
This is tricky. We disagree on NS production being able to be kept at that 1,000 level. I'm following SSN's production forecast - and it shows decline. The RRR (Reserve Replacement Ratio) comes into play and TB is looking for "cheaper" resource to drill and produce new reserves. This takes significant capital - and IMO certainly more than the noted liquidity. Its a challenge between growth and value returned (relative to risk). One of the best in the business at this is EOG (IMO) and their 10-Q is quite interesting.

How would TB discuss SSN in this respect. What is the future of the Bakken properties (as in production, development and capital needs)? What about the new Paradox Basin option. What REALIZED PRICE is required for a minimum 20-30% and a payback of capital in say 12-18 months. Now what is the differential for that area - and that will tell you what WTI index price is needed for that.


(D) Uncertainty:
I'll keep that just at the high level. Maybe TB could discuss say the Paradox Basin wrt to what other companies are doing in that area - e.g. Rose/Fidelity/...

Regards