Things haven't gone well for this fine stock (an understatement perhaps).
Where do we go from here (besides down to 0)?
Well, how about this (a simple 2 step process):
1. They need to spend every cent they have on increasing production.
West Wharton (26.25%) - Outlar-1 successful - high quality gas >3MMcf/d and 200 bbl of condensate/day (currently earning $250k/month for AZZ)
- Outlar-2 to spud next month?
- Other than O-1 and 2, there are up to 5 other prospects on west wharton with similar seismic attributes. Pipeline connections for 2, 3 and 4 are already in place. Additional acreage nearby has been acquired.
Oyster Creek (75% and 67.5%) - Harrison 1 and Scott 1 have been producing more water than gas for a while.
- Harrison 2 is still being drilled. Hopefully the problems which Harrison 1 experienced can be avoided. This promises to be a strong production well.
New Taiton (25%) - Surely they can resolve their dispute and test that upper zone.........it was the only one ever likely to produce anyway?
Little Bear (23.5%) - A covert production site, the site of many black drilling ops.
- The upper zone of C1 is currently being re-completed and hydraulic fracture stimulated to attempt to overcome the compartMENTALisation. This activity was currently underway at the time of the Dec Qtrly release?????
Porters Creek-1 (25%) The well has been put on compression and the average production rate is steady at 70-80 Mcf/d and 2-3 bbls condensate per day. Perhaps this one could be sold to Exoma Energy?
2. Any exploration needs to be funded primarily from farmouts - Rowena Deep DooDoo (50%) "We remain very encouraged by the presence of good quality Wilcox sand on the flank of this large structure. The primary pre-drill risk of the well was the absence of sand and the presence of sand has now been demonstrated. There are a several additional, prospective drilling locations on this feature that may be tested with future wells."
This begun as a high risk/high reward well and showed such promise?
"The well was temporarily suspended on 5 March 2008 on the recommendation of the operator in order to further evaluate the data and seek a farminee for a second well. There will be no further reports on this project until activity recommences."
Potentially contains 200BCF of gas and plenty of sand to stim/frac - should get some bang for their buck from a farmin partner?
AWAITING FARMIN PARTNER!!
- Yellow Rose (50%) As per Rowena, they spent many $M on 3D seismic over this leases. Attractive prospects have been identified.
"Antares and SIDC have now consolidated the joint venture land position with the leasing of an additional 4,300 acres; bringing the total under lease to approximately 8,300 acres. This land position covers the most prospective reef developments seen on the newly acquired 3D seismic. There is increasing levels of industry activity in the area with companies drilling horizontal Edward Limestone wells adjacent to our current acreage. A number of companies have been approaching our JV looking for a farm-in. We expect negotiations to begin shortly. This is a highly attractive exploration trend which is gaining considerable momentum in the area and we have a large number of prospects and leads to drill.
AWAITING FARMIN PARTNER!!
- Kenedy Ranch - Area B (50%) Antares Energy and the Lamay Group each have a 50% working interest in Group B. Group B covers 3,785 acres. Three Group B prospects have been mapped using the 3D seismic and have estimated individual reserve potentials ranging from 30-75 BCF. The primary objectives for these prospects are Deep Frio sands between 13,000-17,000 feet (3,950-5,200 metres).
Not a priority but sounds like we need to farm some out.
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So there you go - it looks like they are already following the 2 step process...........and NATURAL GAS FUTR (USD/MMBtu) 10.037!
It's not as though they have nothing to work with? They just need to ramp up production and be much less reckless when it comes to exploration. Who knows, February next year this stock could be booming?
Regards,
Whippet
AZZ Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
