Forward Estimates ...post CR

Have been doing just a little bit of analysis over past couple of weeks. This is only part complete but I thought I'd post it to open up some discussion.

Keep in mind, I am neutral at this point as in can't really say whether or not SEA is undervalued at present share price or not. I will let the numbers as shared by the company (and those they have not explicitly stated) speak and I'll give my interpretation but there are many ways to interpret the numbers.

So to the CR presentation.
1. Would appear only McMullen is worth capital allocation at $50 oil. Slides #8,12,15,17 confirm this. So SEA only has 14,500 acres and 53 drilling locations worth developing presently. Harsh but IMO reality and you can discard the "premier position encompassing ~40,000 net acres in the Eagle Ford".

2. Slide #8 states Proforma CY2016 production of 7,000 - 7,500 boped and exit rate of 8,000 - 8,000 boepd. Keep those figures foremost in mind as CY2015 was 7,901 boepd and exit rate of 8,055 boepd. This is important one measure is how much capital is required to be invested back into the business to maintain a flat rate of production. It would appear that at the midpoint of Proforma guidance (7,250 boepd) SEA is going to "shrink" by about 10%. Always a concern for an E&P but there is good news in that the newer wells have a higher capital efficiency.


I tried to put a "production" plan together based on the CR presentation using slide#20. Of course that slide does contradict slide#8 a little bit. While it confirms the exit rate range (8,000 - 8,800) it refutes the CY avg which is more like (6,525 - 7,025) and a midpoint of 6,775.

And just to complicate it a little, SEA does flare a lot of gas (as noted in Q4'15 and Q1'16 Qtrly) and that is supposed to be correct. The figures I used were Gross Production. Obviously you can't get revenue from the flared gas.

Anyway my production model ended like as shown below and it has a CY16 production of 7,143 boepd (so close to the midpoint of CR slide #8 but higher than the implied midpoint of slide #20) and 8,625 boped in Q4 - again within the parameters of CR presentation.

Hopefully y'all can follow my logic. Q1 is actual. Q2/Q3/Q4 follow slide #20 in terms of when wells are put into initial production (IP). I'm also using an approximation of the McMullen county type curve slide#15 to separate the "new production" from the legacy declining wells.

Here's the result



I then use that production profile for some forward estimates which follow. I also allowed for some flaring of gas (not a huge difference) and very little contribution from hedging (might in reality even be negative if oil uptrend continues). The index price for oil is after the differential has been applied.



So what you have to do as investors is match up what you were being told about "Breakeven" and capital expenditure before the cap raising and what it says now.

While I called it Growth Capital in Q3 is not really growth capital - merely separating this as initial plan was 5-8 completions versus the new plan of accelerated development.

You should also put in the Cash at start of Qtr and then the cash added from CR to figure out what surplus cash that SEA has for Debt paydown (if any), liquidity and for acquisitions.

Food for thought.

Regards & GFTA