I've read and re-read the ops advisories. The curtailment of drilling has resulted in an undrilled inventory of 13 wells. In addition there are 6 wells that have been completed (i.e fracked) but remain shut-in.
That is different to what say EOG discusses with their "fracklog". They simply do not wish to grow production at current low oil prices. So they drill but hold back completions until oil prices rise (possibly creating another production surge???). Holding back on completions creates a better story for capex and/or production cuts of 2015+ and can show the company's ability to hold production steady if it wants to.
For a small sized E&P typically, they need cash to fund operations and interest expense. We're seeing this with SSN now. Now apply the steep decline production curve and this aggravates the problem. Bit like a rock and a hard place. Holding back those 6 wells pushes out the decline curve but hurts the cash flow.
Now shutting-in production, and that's SSN's description "...however given the low oil price, 6 of the wells will remain shut-in pending the recovery of the oil price..." implies to me that maybe Slawson is saying they will not produce at negative cash margin. Don't know the financials of Slawson but its a wealthy family (supposedly).
SSN Price at posting:
1.1¢ Sentiment: None Disclosure: Not Held
