The oil producing asset has obviously been purchased because not...

The oil producing asset has obviously been purchased because not only does it have reasonable reserves which are currently cashflow positive at current oil prices, but with an eye to the future they believe that there are still considerable growth opportunities in the 123,000 acres that they have just acquired to build up future reserves;

"Exploration and Development Locations provide large upside"

"Subsurface well data and 3D and 2D seismic provides the basis for considerable exploration and development opportunity supported by the extensive infrastructure and facilities."

"However, Sacgasco plans to use its geological and geophysical strengths to provide technical support to the operator in the interpretation of the extensive seismic data to determine development locations to maintain and grow production, as well as map the exploration upside in the extensive Project acreage."

So the immediate strategy is to lower current operating costs and tap into the proven, developed but not producing reserves to access another 300 barrels per day to increase profit levels.

The next strategy is to review the seismic and well data to determine areas for exploration and development to build up the reserves supported by the extensive infrastructure they have acquired.

SGC, XST and Operator Blue Sky would have reviewed the seismic and well data extensively before purchase and obviously see significant upside. Dont forget Blue Sky already have significant operations in the vicinity so they know the area like the back of their hand.

If they can do this, it will be the big game changer as they would have increased cashflow and reserves significantly, and with major infrastructure in place they could sell the asset for a significant premium to the purchase price in the future (or be taken over).

Speaking of infrastructure GJ said "Our Operator has estimated that the infrastructure that is part of the Red Earth acquisition would cost hundreds of millions of dollars to replace".

Note that he didn't say the infrastructure was worth $100m but hundreds of millions, so it could be worth $200m to $300m +.

So imagine what increased reserves and an increased oil price supported by extensive infrastructure worth hundreds of millions could do to cashflow, profits and a sale price in the future.

The Alberta Energy Regulator has forecast the Canadian sweet light oil price to increase to $60 next year (midcase) with a highcase of $70. They have forecast the oil price to keep gradually rising to $80 (midcase) with a highcase of $100 by 2029.

https://www.aer.ca/providing-inform...nditure/crude-oil-prices/canadian-light-sweet

Big picture glass half full for me