Water cuts in heavy oil reservoirs are quite common, and unpredictable. As I understood it from someone's enquiry with the company, they had to shut down a couple of the wells while they connected a pump to the water disposal well (ie the newly commissioned production facilities hadn't been finished with this item yet). A release on Feb 10 was still very bullish on Feb revenue, so my guess is that subsequently the field was largely effectively shut down until they got the pumps hooked-up, hence the drop in average production to 500 bbp pd. The enquiry said that the wells would come back soon on I think at around 850 bbl pd, ie at a slightly reduced rate. They have four horizontal wells running now, and will drill 5-8 more this year, so one would imagine they will still have pretty decent production rates when the field is fully ramped up.
At the end of the day, whether they are producing 2,000 bbls or say 1,500 bbls isn't that critical for the near-term prospects of the company. NSA is a very much pilot project for much bigger ones coming up. Importantly, they will have plenty of cash to finance this year's large 20 well programe. Even if the rates do come down to 800bbl to 850 bbl, the stock is very well supported at 50c valuation rise, with the exploration potential as upside. Unrisked EMVs are several $ per share for this year's drill, and some of these are pretty low risk prospects.
I have to share everyone else's frustration. I held on to SAE through the last sp dive a year ago. Hopefully over coming months SAE will start attracting more instos and other quality shareholders that will be less likely to dump the stock in bad markets, and we will see a less volatile price chart going forward.
I think in the near-term if we get a reasonable recovery in sp, the glass will suddenly look half full than half empty.
SAE Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
