Hi MB,
Interesting conclusion...
Consider this - the "norm" of a O&G junior is that they spend 2x4 cash flow on exploration (gotta grow) and like you I've also outlined the sources from which capital can be (legally) obtained.
I'm a fan of the EFS. That move was unexpected but a bold move to deploy limited capital to accelerate cash flow - everyone by now ought to know how shale wells produce, the decline of the various plays, what NRI and WI mean as well as how the realized price of the oil being sold affects the IRR and ultimately the cash flow of the company.
Was the EFS a smart acquistion. I think yes. Was it affordable at the time - possibly.
Acadia and Bowtie.... welll Bowtie is really small but Acadia not so - 45% of $3M is a lot of coin (see opening paragraph) and we are the operator. Not sure GGP has either time or money for this well commencing Sep 12.
The jewel is the Permian. We have some choices there.
A Canadian Oil & Gas analyst wrote that juniors are at a disadvantage in the shale plays. The big plays (read Bakken, EFS, HZs almost anywhere) have well costs in the $6-$10 million range, and many juniors only have market caps of $30 million. One bad well and they’re hurting, and two bad wells and you’re done.
He thinks Juniors need to find lower cost plays (well costs of $2 million all in) that produce 75-100 bopd.
Does that sound like vertical wells say in the PB Wolfcamp? Mine the jewels and the riches will flow.
I've posted it before, but if GGP can get the 1P reserves done, and get a RBL to develop the vertical (with JV preferably) and look to sell off say 60% of HZ cline in JV (just double what Devon did - say $5K - $6K acre as we don't know how much can be called PUD - about $10M up front and $15M is drill carry).
IMO, GGP are not paying their running costs - they have contracted payments for the drills they have committed to which I'm not sure they can afford. They would also be very close to running out of working capital.
If I was grading their term paper - maybe best score is "Pass Conceded". Needs improvement, a lot of improvement. A well communicated plan would help. Don't need to see anymore descriptions of the assets - know them well enough - describe your plan and where you are at.
That said the SP is still too low on asset value.
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