personal prediction

Before I go any further I should clearly say that this is a personal prediction and should be treated as such.

I’ll explain my reasoning for the prediction as I go and time will soon prove the prediction right or wrong.

Having done the well search at the weekend (as posted under the heading Red alert) and the seen the comments made by cinbo in the Green alert thread, as well as Stubby’s comments on the last weekly thread.


A thought suddenly occurred to me as to what exactly is going on with Antares.

I’m predicting that they are currently trying to sell the Southern Star asset and are well advanced in the process.

The recent increase in draw-down’s on the loan facility is because they are paying for all the frac’s & the purchase of nodding donkeys etc for the wells drilled in June-September. When Antares started the drilling program I was always wondering why expenditure was never as high as it should be, as I worked out later, it was because the cost of these items were being incurred once the wells were completed.

Go back and look at the Eagleford shale sale and you will see when they started that process they suddenly stopped drilling wells. Just like they have done at Southern Star.

If they carry on drilling wells they will just increase the size of the loan without really increasing the sale price they achieve.

As I have written on several occasion, I have never regarded the year end target of 2,500 boed on a BTU basis a hard task to achieve. Simply because it’s not to be achieved by only having a certain number of wells in production and as they have access to such a large loan facility, they could just bring in more and more drilling rigs to ensure it is achieved on time. As gas production now makes up a much large percentage of overall production, it makes the target even easier to achieve with the 40% uplift when converted on a BTU basis.

If they don’t submit any new drilling permits in the next 21 days, then it is very unlikely that they will be able to get any meaningful production from a new Southern Star well before the end of 2012.

Just look where production currently is, it had fallen to 2,300 boed by late September, yes there has been a number of new wells come online since then, but most of them are only a 50% working interest. The last weekly report showed IP numbers for 3 of the new wells so they have reached peak production already and will only decline from here on in. You’ve got 3 more month’s of decline’s to factor in from all of the existing wells. With only Alamo and Ray 6 to definitely still come online.

So it might be a lot tighter than previously thought to meet this target if there are no new wells drilled from here on in.

As for the sale price, I’ve not really had enough time to work out a firm guestimate number yet.

They need at least $210M to get them back to where they were after the Eagleford sale (thus having NS & BG on the books free of charge, although personally I don’t yet place any real value in these 2 properties). Then there will be tax to pay on the profit as well. So they may need a sale price north of $225M just to be back at $160M.

Will they get north of $225M when so much of the production is nat gas? That’s the big question

Then you have to ask the question where to then? Can’t immediately think of a first mover play they would want to go to instead.

As I said at the start it’s a personal prediction and it shouldn’t be long before we see one way or the other how good or bad it was.

LOTM