BRK... a " thesis"... err almost! part 2

So where do we  go from here?

For BRK, it is actually fairly easy to predict what will happen in the future going by what happened in the past. With the current production,  cashflow from the Jewell, option conversions and the ability of the BRK business model to monetize the hydrocarbons in the ground in a manner that maximises it's returns, this company will not be capital constrained further.

BRK have released a 11.6 million BOE SWISH resource that will be converted into reserves by drilling the 3 initial DSU wells. The company says it is a very conservative number which was derived before analogous wells by offset operators delivered the outstanding flow rates within the SWISH AOI.

We have seen the below production type curve of the Jewell below unadjusted for the latest data from adjacent wells

View attachment 3391436


which matches the type curve form the original BRK SWISH 2018 presentation


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You can see that the predicted ultimate recoverable reserve for a Sycamore well is over 2.1 million BOE


Now, the Woodford type curve...

View attachment 3391511

shows an ultimate predicted recoverable reserve of just over 1 million BOE per well, again calculated before any offset wells were drilled in the SWISH AOI.

As mentioned before, a industry rule of thumb for drilling horizontal wells in the STACK/ SCOOP is a US$8-10 million horizontal well targets a minimum 1 million BOE reserve and 1000 BOEPD IP24 rate.

Using the BRK STACK model of a 10 million BOE reserve per 1200-1300 acre  we easily arrive at the SWISH 3 DSU's of net ~2500 acres  for both the Sycamore and Woodford formation could give us ~20 million BOE reserves.

For a second exercise, BRK state the 3 DSU's will need 21 wells, including the initial 3 wells  to fully develop the 3 DSU's. The Jewell development is for 2 Sycamore wells and 5 Woodford wells. Not knowing what the development plan for Rangers and Flames is but as a guess applying the same , the whole plan could be for 6 Sycamore and 15 Woodford wells.

Using the above rules of thumb, and collating the ultimate recovery of 2 million BOE per Sycamore well,  1 million BOE per Woodford well, and DECREASING the EUR per well by 20%  (for a safety margin expecting child wells not as productive as the initial well on each DSU), we get a Sycamore reserve of ( 6 x2.1 x.8)= 10 MMBOE  plus a Woodford reserve of ( 15 x1 x.8) = 12 MMBOE for a total of 22 MMBOE for the three DSU's.

Now, this is very rough  and inaccurate and probably overestimates the reserve base but the message I want to convey is BRK are being very conservative .

So what does all this mean?

With the capital constraint shackles being released, the drilling , completion, production and PUD revaluation  and monetisation,  should enable BRK to over the next few years,  build up a material prime tier 1 acreage position of a greater magnitude than it had originally planned at SWISH.

Using the rules of thumb described above,  assuming the zones in the target  BRK acreage will produce reserves and production in a similar order to the current position, one can with a fairly accurately guestimate the reserve  and production potential of that acreage.

So if BRK build a 10000 -13000 net acre position after pooling, we can reasonably confidently calculate there should be an estimated  80- 100 million BOE reserves on that acreage.  Even if you were to use the very conservative current reserve position, you still come up with  40- 50 million BOE reserves in a 10000-13000 acre holding.

That is the size of the prize  facing current and future BRK holders,  and all  the company needs to do is  what it is doing right now. The above are just a few reasons amongst many why long term holders ,who have ridden the journey from the beginning, are so confident about the success and potential of this company.

Thank you for reading.

Cheers

Dan