So this is my attempt to quantify what the BRK production profile may look like going forward over the next 3 years from the development program articulated by BRK in the presentation of March 3 2022.
I have roughly converted the graph from the SWISH payout of March 29 of the Jewell which shows a monthly cumulative total into a daily production number at the end of each month. As we only have actual numbers for the first 6 months of the Jewell which overperformed the model I used the actual first 6 months numbers and then quickly approached the model for the nest 16 months.
I then added these daily production numbers, taking into account the WI of the wells, ( 41.6 % for Jewell and 80% for the remaining wells to build a production profile) using the dates for commencement of production according to the timeline given by BRK
The main potential errors in this approach are :
1) Each well in reality has it's own production profile , so some will significantly outperform the Jewell ( hopefully Rangers) and some will underperform. If Rangers performs as expected then the calculations may actually be out by ~1000 BOEPD from July 2022 so I have adjusted the result to incorporate this . For the other 5 wells I have used the Jewell curve as this should average out over more wells it may be that the Jewell modelled production may actually be close to the average of all the wells so I am happy to use this.
2) There are inevitable changes and delays in drilling , completion so it is highly unlikely that by the time well 7 is drilled and completed, it is highly unlikely it will be placed on production in mid July 2023 as can be extrapolated from the graph.
Having said that, this is the best we have so I believe the approach is valid. Using August 2021 as month 1 my rough calculations have the daily production at the end of each month as follows.
............... Jewell.. ........ 41.6%...................... 80% ............. Rangers ....... 80%
After adding the wells coming on stream starting with Rangers production in April 2022 to the Jewell we have the following endo of month production totals as each of the wells comes online every 3 months
April 2022 Jewell (382 ) + Rangers ( 1152) = 1534 BOEPD
July 2022 Jewell ( 291) + Rangers ( 1440) + Flames 800= 2531 BOEPD
Oct 2022 =3346
Jan 2023 =3882
April 2023 =4316
July 2023 =4602 BOEPD
It is interesting to see the effect of well decline as more well are added as the cumulative decline of the earlier wells cuts into the gains of the following wells.
The important feature here is even though the numbers are not correct, it is pretty obvious that BRK should be experiencing a quarter on quarter increase in production until July 2023, or whenever the last of the 7 wells is drilled.
Additionally, despite the declines it is also apparent that BRK will still produce significant volume from the wells going forward, even if no other wells are drilled as the later declines when the wells are producing a few hundred BOEPD. This is the annuity type low decline production David is talking about these wells generate for many years after the initial flush production.
Production for the period end July 2022 ( 2531 BOEPD)- July 2023 (4602 BOEPD) will average 3635 BOEPD or 1.328 million BOE.
If we use the netback per BOE of US$ 51 from the below graph ( US$77.30 is per barrel oil)
then the 1.328 million BOE production in the mentioned period should allow BRK to bank US$ 67 million or AUD $90 million at US$0.75. Bearing in mind it will cost BRK US$ 7-8 million for the 6 wells or $42-48 million or AUD$56-64 million.
Funding will come from the net AUD $12 million cash in the bank at Dec 31 ( minor Rangers expenditure to that date) plus the AUD$16 million from option conversion plus AUD$ 2.5-3 million Jewell cashflow Jan-march 22022.
So if my calculations are correct, if commodity prices average ~10% lower than they are now over the next 12 months where they were for the netback US$51 per BOE , then after funding all the wells post Jewell , and production till July 2023, BRK should have AUD$90 +12+16+3-64 = 57 million in the bank at that time ( minus corporate expenses and no major other expenditure).
And this doesn't include any possible monetisation of the Woodford PUD's.
Apologies for lack of editing but early rise for a big day tomorrow as wife and I plus 4 friend are doing the 27km seven bridges walk tomorrow ( unofficially so just us) so wont be able to respond to any questions till later. Please be critical of the data but is just my best estimate.
Last comment.. whilst the calculations are indicative , rather than set in stone accurate, this may actually be conservative , or not.
But one thing for sure, this is not a pipe dream. BRK will do this, drill these well, produce and sell these hydrocarbons over that period, subject to the usual potential delays in drilling which may push back dates a few months ( not years)
.... and this is just the beginning, high commodity prices or not.
Good night and Happy Easter
Cheers
Dan
(20min delay)