An operator in the US starts with land-banking. The price of the acreage will depend on wht they r targetting. In case of AZZ, its shalegas (source rock is the deeper EFS) & currently every major in the states & overseas is getting their foot in the door (BG, Statoil) in the shalegas play, so this means cost of land is generally on the high side.
VIL are drilling in a conventional 'Saltdome pierced Sands' which r common in Louisiana. Totally different metrics when it comes to valuing the acreage first up.
Apart frm RFE, AZZ & STX, there r over dozen other operators with acreage in the USA. Not all of them have a decent SP reflecting the nature of their 'play', so one needs 2b very careful. With VIL, one thing is obvious, there dryhole costs were $1mil, cash on habd is $3.3mil, so the recent 80 acres + costs for Perforation + Pipeline tie-in could well empty their kitty in 2-3 months time.
The beauty abt FP1 type of wells, is once it goes to production, the sale srevenue will pay-off the operators share of costs well within 1 year.
Should b interesting how VIL plan their future wells to drain the HC's.
VIL Price at posting:
5.2¢ Sentiment: Hold Disclosure: Held
