Hi mate.
I wouldn't say more than doubling production in the next 12 months is little upside.
Previous drilling ( ex WP ) was reserve definition drilling funded by 2 equity issues and option exercises. Those wells were always going to be drilled when BRK were a real estate play, except originally not going to be funded by BRK nor were BRK going to have a WI in those wells apart form the back in equity held by Black Mesa.
The Real Estate model required those well to be drilled to prove PUD reserves to revalue the acreage to be sold.
When BRK announced the 1 well per quarter program in it created confusion because it was an " idealised" program for the time. This was one of the number of shareholder communication mess ups BRK have made along the way which has made the story hard to follow. They were saying this was the way the DSU's would be developed, if BRK were going to developing. But at that time, it wasn't BRK's intention to monetise the asset through development drilling. Unfortunately that was the gross miscommunication back then which confused the hell out of everyone which needed clarification .
Think about it....if the preferred monetisation pathway in 2022 was selling the reserves undrilled in the " Real Estate Model", why at that time would BRK talk about drilling one well every 3 months over 5 or so years?
In 2024, BRK are not monetising via selling the PUD's because they wouldn't get anywhere near the price they want, need , so they have chosen the development pathway. The difference now is CLR have shown the development pathway is best served by back to back , wine rack multizone pad drilling of the wells. This gives significant drilling and completion cost savings, and enhances subsurface parameters in ultimate recoveries and boosts production through more efficient fracking.
So now that BRK have chosen the development path, why would they drill and complete in a much less efficient financial and geological way ?
Why move the rig 20 times to each pad , rig up and rig down 20 times , when you can move the rig 4 times, rig up and rig down 4 times to drill the same number of wells.
Why shut in the previously drilled wells on each drilling pad ( and adjacent operated pad) every time the rig comes back to drill another well, (and each time you come back to a pad shut in more and more wells), when batch D&C means you only need to shut in the adjacent operated pad wells once?
The original 1 well every 3 months was the BRK idealised method of " cashflow funding" the wells in 2022.
If they had decided on monetisation in that method, the sawtooth production profile would be a bit smoother no doubt, however I am not sure BRK be any more "exciting" .
But
1) The cashflow would still be pumped back into drilling the next well
2) Drilling costs would be higher with the need for rigging up and down
3) Shutting in a significant portion of production 4 times per year would result in significant cumulative constraints and it can take months for wells to return to pre shut in levels affecting production even more.
4) There would be lower well EUR and production due to less efficient full field frack jobs affecting reserves and cashflow.
I can do without that sort of excitement
I'm pretty sure, even if in the unlikely event BRK had embarked on the 2022 pathway
1) They would have paused drilling for at least 9 months period post Wolf Pack when oilfield inflation caused costs to rise 20-30%
2) They would have adjusted to the CLR batch wine rack development anyway after seeing the data.
Despite being part of one existing oil and gas field, each DSU is essentially a sperate oil and gas field development. In such circumstances, the typical path would be to develop each individual field fully, one at a time, which would take a few years.
BRK are doing nothing different to any other junior oil and gas company that has 4 small-medium oil and gas fields slated for development that are intended to be funded out of cashflow.
Cheers
Dan
C'mon you Aussies!!!
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