My guestimate of July 2023 was essentially based on when I thought the DSU applications for Bruins and Maroons would be completed. A couple of factors have delayed that process, firstly, in Jan, BRK modified the Bruins application and Maroons, where the original applications were put up in early 2022, have been protested. For Bruins, this has meant extra steps and for maroons, this required a hearing on the protest docket which was heard in April 2023 and the Judge still hadn't handed down his decision on the protest in early August.
Looking through the most recent court docket and hearing results, I expect news on both those fronts pretty soon. BRK 's ability to make deals would be harder without progress on those matters as they wouldn't have full control of the acreage until the DSU's are won, and wouldn't have maximum acreage potential as without DSU's they can't pool the non leased acreage with the DSU's. .
There will be a monetization event/ events this year. DP is in Oklahoma right now and isn't twiddling his thumbs on a junket. I can't remember who "accused" the team of being on a junket in Tulsa but it's pretty obvious whoever said that has never been to "God fearing" Tulsa.. let alone in late summer.
The lack of BRK drilling activity at SWISH is multifactorial.
1) Huge inflation in drilling and completion + 20% costs late 2022 through into the first half 2023 made single well drilling unattractive. Those costs have adjusted back to more normal ranges now.
BUT..
2) It is becoming increasing obvious that that most efficient way to conduct Full Field Development is to drill and complete all the wells back to back. The cost savings of doing such can be up to 20%. Such FFD also negates the need to shut in wells as all wells are put on production simultaneously. So the days of drilling single development wells in the large DSU's , one at a time to develop a DSU are pretty well done and dusted in most cases..... an operator may drill a single initial well to achieve DSU HBP status, but it is less likely they will drill 4 development wells in a DSU one at a time every 6 months over a 2 year period. The one off wells would cost ~US$10 million vs ~$8 million, and each time a well was completed and fracked , the existing wells would need to be shut it. That is a very expensive and disruptive development mechanism.
As it is now more likely BRK will monetize through participating in the FFD of it's SWISH assets and capture all the benefits of decreased unit drilling and completion costs, the increase in production and reserves etc etc, rather than selling the assets. As the assets are ready for FFD, BRK is not going to drill one at a time, single development wells for which the benefits of a multi-well program will be absent.
3) The structure / T&C's of the JV/ drilling partnerships will determine what sort of carry and how much capital BRK will need contribute to the development program. BRK could probably get a carry for all costs, but that would mean BRK would end up with a much lower WI than they would want. For example, BRK could possibly get a free carry through development and keep 15% of the DSU's, but for a DSU producing 10,000 BOEPD initially, that is 1500 BOEPD to BRK , which becomes 1300 BOEPD after royalties. DP might want to keep the majority WI position and operatorship, meaning keeping a 40-50% WI, which would not be a free carry. In such a case, BRK may need to contribute 20-30% ( example only) of the development costs, but retain 4000-5000 BOEPD pre , or 3200-4000 BOEPD post royalty.
In such an example, a 6 well development would cost ~US% 50 million so BRK would need to spend US$12-15 million. Those funds would be expended over at least a 7-9 month period with no cashflow coming back from the project until the project completion. BRK need to ensure they have sufficient capital to participate in a meaningful way in the monetization, if JV's/ drilling partnerships, rather than sale is the way they proceed.
There is no lack of action as such for this monetization process, just a lack of information from the company which at this time is necessary , but very frustrating for holders.
In regards to the director's loan, you bring up a valid point. The obvious solution is the company create the circumstances which give the best opportunity for a rerate before 30 June 2024.
Cheers
Dan
BRK Price at posting:
1.3¢ Sentiment: Buy Disclosure: Held
(20min delay)