Hi Sprout, Very worthwhile commentary extensions. Those calcs I...

Hi Sprout,

Very worthwhile commentary extensions. Those calcs I did were very much back of the envelope just to highlight that perhaps its misunderstood how costs become part of an E&P story. Seen that replay itself on many a HC forum. Thought I might just add a caution flag and if it helps then well and good and if not so be it.

I'd also add things like hedging and midland oil differentials to production revenue. Costs (in $/BOE) will naturally come down as production scales up and existing wells decline - but that is the challenge for the minnow. To be able to do that while growing the share price.

Also suggest a closer inspection of the well economics - starting with the decline curve. Maybe look to a cumulative production curve to get a better handle on those earlier years. The EUR cited (87,000 Boe which was 72,640 oil and 87Bcfof gas) is the total produced OVER 40 YEARS (ending production is 1 barrel of oil a day).

Probably also want to further examine the Farm-in agreement.

Another thing to keep in mind is that the Permian is VAST. There are 4 separate basins/shelfs and within those there are well defined plays which vary considerably. The Cline is expensive (and early days still) - I hold DVN (Devon) and they JV'ed their acreage with Sumitomo. Their work has pushed the boundary to the easternmost edge (PYM's area)
http://blog.ihs.com/horizontal-development-of-wolfcampcline-pushes-into-easternmost-permian-basin

Also worth a read - just to temper "enthusiasm" for growth prospects in Cline
http://www.oaoa.com/inthepipeline/article_d466e422-ca5e-11e3-9c89-001a4bcf6878.html


And above all else, when reading these projections looking at the price deck being used for IRR and NPV - in PYM's case its $90 oil. Now if you strongly believe that $90 oil will be back in vogue soon then an unhedged (?) producer may do very well.

Anyway, GLTA holders.