Hope that all had a very happy Christmas. I was obviously on the...

Hope that all had a very happy Christmas. I was obviously on the naughty list as my wish of a return to $100 Oil didn't happen,

CLR put out some interesting plans for their future and lots of numbers subsequently got crunched.

I did some more number crunching myself - and when/where I'm wrong I'll certainly make the needed update. These numbers are sourced from SSN Q3 10Q report and the SSN Nov AGM presentation (so don't shoot the messenger).

I'll just briefly described the methodology used - we can argue (or agree) on those points.

1. Per SSN AGM oil production is 84% of total BOE produced
2. Using the Boepd estimates provided for each Qtr in 2015, Qtrly Boe & implied oil production is calculated
3. Using the Hedging described in SSN Q3 10Q, all hedges monetized in Q1/15
4. Bakken well head pricing - roughly a $15/Bbl discount to WTI - so $45/Bbl used for unhedged production
5. Sales gas (adjusted for NGL content and flaring) based on Q3 ratio of gas sales toil sales at 1.3Mcf per Bbl oil
6. Flat pricing $4/Mcf
7. SSN revenue then calculated and average price per BOE determined for the Qtr.
8. Simple Cash Margin is being estimated using Q3 costs (little unsure on Prod taxes) - estimate is $10.16/Boe
These costs are annualized and then divided by total BOE produced.
WARNING: IMO this underestimates SSN's costs as SSN has a lot of new wells coming online and that will add to LOE. You can see that by simply comparing the estimated 2015 number of $15.23 to the Q3 number of $24.83 which is a reduction of $9.60/Boe. Obviously LOE will go down as production increases.
9. Estimated EBITDAX and the critical annualized Debt/EBITDAX multiple inferred.

Now I will of course point out an obvious difference between this and SSN NOV AGM presentation - where I can not see anywhere what the oil price used for the revenue estimates (slide 23) that yields 2015 rev of ~$23M versus my estimate of $18.7M. Also since it is unknown what SSN means by lifting cost, I've used the Cash Margin that most US oilers will show in their presentations.

My takeaway from these numbers is as follows:
a. The LOE figure is very critical. If I simply added 20% to the cost (for all those extra wells) and leave all else alone then obviously cash margin falls commensurately. The impact of that will show up in the Debt/EBITDAX multiple which would go from 2.94 (which is below the required 3.5) to 4.2 times which is not OK (as it the bank has a conversation with you).

b. Not discussed here is the impact of the Mar 31, 2015 Reserves review. Clearly you would expect to actual PDP and PDNP reserves to increase given the drilling. But the all important calculation of SEC NPV10 may not be so favorable. How that impacts the Borrowing Base is to be determined.

Also unknown (but had it occurred you would have expected SSN to make an announcement) is whether SSN took on additional hedges during this Qtr (even at what would have appeared at the time to be an unfavorable price).

GLTA