So by your estimation, if I understand correctly, investors and the market will reward BRK if they have a plan with targets and stick by them.
Well, BRK overachieved on the HBP drilling "plan", ahead of time with the acceleration of Flames, on budget and safely... and what was the investors and the market judgement ? IMO, your fixation on a specific plan and timetable is misplaced because BRK exceeded expectations on the HBP drilling program and the market didn't rewarded the company for that.
You can't dismiss out of hand the processes just because you don't know about the process. (well actually you can because I can't tell you what you can/ can't do) I can't help other peoples lack of understanding and lack of research. Lack of research and understanding as a foundation for negativity/ ignorance on any matter is not a good way to proceed. Agree BRK is a complex beast which does need time to understand and unravel, but I consider that my competitive advantage, and thinking about that, not really sure why I spend all this time and effort in sharing that!
Loose target is my term, not the company's.
BRK had a huge issue with the Rangers well last year with Camino's crazy protesting, delayed them for 3+ months even though the Rangers well had nothing to do with Camino. All the negativity around BRK at that time was the Rangers CR and the free options. There wasn't a peep about an actual delay in drilling because no one knew there was a delay. They had a plan to drill 3 HBP wells as the first step of the monetisation program, but they didn't actually put an actual timeframe which in hindsight was a blessing because guys would be crapping themselves much more than they are now when Rangers was spudded in December rather than September. The original "plan" was for SHE to participate in Rangers but that went out the window.. I guess that SHE not following the "plan" is also a testament to BRK failing?
Agree BRK were lucky with the oil price spike, but again you miss the point . BRK were always going to drill the 3 wells when the POO was over US$ 40 because the primary reason for drilling each initial well was to get the DSU's to HBP, not for production. The cashflow is effectively a bonus, and with these high prices, a brilliant bonus indeed. The original plan was for BRK to forgo the cashflow from the 3 HBP wells to have 3rd party wellbore only funders drill each initial DSU well.
Yes, it is the Black Mesa team that do the hard yards in Oklahoma, it is their talents, contacts, local knowhow etc which is the driver of this success where without them , BRK wouldn't be in the fantastic position they are now. BUT, it was DP who assembled the team, devised a remuneration and incentive pathway which has kept the team in place, despite being paid significantly less than their peers by up to 50%, on the promise of if they deliver big, they will be rewarded big. ( you need to understand the Black Mesa structure here).
You ask me how do you we keep management accountable and how do we measure success outside of the SP if there are no plans or targets... well I say there are plans and targets, but I understand and accept that plans and targets are subject to many factors outside of company control. I have lived the BRK experience since 2017 where circumstances caused the company to change, even pivot . But the one part of the underlaying "plan" was always to initially get the DSU's HBP as that was the revaluation enabler. The actual pathway changed as BRK went from no direct participation in the HBP wells via well bore only partners in the USA, to SHE performing that role, to starting the SABO drilling trust when SHE dragged their heals, to CR for Jewell (after the SABO trust didn't reach funding targets) which made SHE crap themselves and raise the required funds in 3 days when they didn't raise for 18 months, to SHE participating in Rangers, Flames to them not participating so BRK had to raise for Rangers. The last 4 deviations ( from the SABO trust to drilling Rangers) occurring within a space of 12 months... specific plans change.
The pathway to build the business has always been :
1) acquiring tier 1 undeveloped acreage
2) drill that acreage for HBP reserve status to facilitate revaluation
3) monetisation of those reserves by methods that provide the best return for BRK shareholders at that point in time.( outright sale, partial sale with partial development, JV funded development or combination of such)
4) repeat on a larger scale....
... That is the plan, with no specific timeframe given. IMO, it looks like they may have made a rod in their back for themselves when they put up that drilling flow chart.
But,the plan is to drill 2 wells by Christmas so lets see what happens. If they only get 1 well drilled and start the other 1-2 months later, is that really a failure of management in terms of delivery? As I said before, if BRK were to pick up a new DSU for example in the next month or so, it would potentially be more advantageous for them to drill a HBP well on that lease, instead of a development well on Jewell/ Rangers and that would throw the timetable out.Would that constitute a failure of management because taking an opportunity caused them to miss a supposed deadline?
So, if BRK don't get 2 wells drilled by Xmas, but get the 2 wells drilled by March which was caused by a court process which delayed approvals by a couple of months , which mean't they missed a drilling slot which delayed them by some more, then I wouldn't deem that as unacceptable at all. That is part and parcel of the oil and gas business. What wouldn't be acceptable would be if Xmas came and went and no drilling, and just because BRK missed that timeline, they announced they would abandon drilling those 2 wells.
As a shareholder, I judge BRK by how successful they are in building their business and create value per share. I judge them on their balance sheet, assets, profit ,cashflow, prospects for growth, management, operational success/ failure. I am not concerned if they miss a time frame if I know why they have missed and any concerns I have I express them to management. If I have questions I ask them directly and have been doing that pretty well from the start of my investment.
How anyone judges BRK is up to them.
BRK say to the market "we will keep on doing what we do best, we say what we do and we do what we say"... maybe they should add, " but not exactly to the time we may say we will do it"
I totally agree that the market hasn't bought it and has judged the company via the share price accordingly.... that is plainly obvious.
What is not obvious is why the market hasn't bought it so far.We all have heard the theories from DP being useless and untrustworthy, to CPS, to free options, to lack of communication, to dilution etc,etc. may be a combination of all of those.
On operations , and delivery , I disagree with you, they have delivered even with some Rangers max flow underperformance and we won't know about the 2 wells drilled by Xmas until closer to Xmas. I certainly don't expect any new SWISH production to be on line by Christmas, be it from one well or 2. On communication , I agree there is room for improvement .
Anyway, good chat.. thanks!
Cheers
Dan
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