Just looking at the information you have presented and your commentary, I have some comments around that and then some further generalisation which are not solely directed at you.
Who cares what the actual drilling costs are if AKK is not paying. AKK don't have the funds to pay for drilling presently and based on your research that Florence results were not that good, is a 50/50 JV with no carrying costs to AKK for 50% of production, on two wells, a bad thing to find out if this area is just like Florence, or even worse or better? I think it's pretty prudent that AKK has laid off the risk to someone else and is actually getting some drilling done in this low oil environment when many other companies have stopped drilling or don't have funds to drill.
Furthermore, AKK are in discussions for a further 10 wells to be drilled by Pierre in exchange for 50% ownership of the Pierre formation, so if the results are similar to Florence who cares as it costs AKK nothing and if AKK gets better results, well so be it however there is no way AKK would be able drill 12 wells as they do not have the funds. I don't think a further 10 wells will be drilled if the results from the first two are poor anyway.
In a further post in response to maxmojo you say;
"Explain to all of us how the JV creates shareholder value for AKK. No crying about 10 wells no risk safe choice. Explain how much capital does AKK need to contribute. What is the AFE for a Pierre well where AKK is responsible for completion and production tie-in costs. What is the Cash Margin for any oil produced. What is the sensitivity to oil pricing. What is the expected IRR that AKK is looking to achieve for its investment of shareholder (your) capital."
Have you forgot that this is an exploration company that has some production in Eagle Ford that is cash flow positive and also some non meaningful production in Kentucky and Mississippi. Eagle Ford has produced some okay production numbers in under a year, 377,638 BOE to 31 December with 18.82% of that to AKK. Eagle Ford is free carried by Halcon.
Well Name Working Net Revenue Interest Well Started Producing Total BOE Dec 31, 2014
Stifflemire #1H 22.5% March-14 109,362.41
Kaiser #2H 22.5% July-14 86,762.86
Nemo #1H 22.5% July-14 68,463.70
Redbud #1H 15.20% July-14 61,502.17
Curington "A" #1H 4.60% October-14 41,322.61
Seaducer #2H 2.69% December-14 10,227.55
The JV announcement for the Pierre shale prospect states Pierre will carry AKK on the two wells with AKK to pay completion costs on the event of a discovery. Again in this environment who cares what the net return is as long as it is positive, trying to work out what the expected cash margin, sensitivity to oil price, IRR is ridiculous on an exploration company that is trying to see what the field holds. AKK is what it is, an exploration company, if you invest in it with no particular large scale project how are you going to get, let alone expect an IRR or return on investment.
If you are invested in AKK, your investment holds direct correlation to the price of oil. If the price of WTI oil has fallen by over 50% and sits close to production prices what do you think happens to share prices of oil companies. Has the company and its directors caused the drop in the share price or has the fall in the commodity caused the drop. If you don’t think it’s the fall in the price of the commodity coupled with the fact that AKK is an exploration company well maybe you have missed something (that is for everyone). Unless AKK has a massive discovery then there is not going to be much movement in the share price if the oil price stays where it is. Further Eagle Ford drilling is on hold until Q3 and Q4 so I don’t think the price is going anywhere north to soon if oil prices stay where they are. Even if oil price move north, AKK still needs to bring on more production to make the share price move forward, drilling now with no cost to the company can get AKK into a good position if oil prices move north and discoveries are made. Basically the Eagle Ford production is funding wages which enables there still to be staff to work on deals such as this JV. I don’t think there is much else to the company at the moment, what else can they do in this scenario?
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