further news, page-64

Hi Gassed,

Cmonaussie is very annoyed (with himself). I said my first exit milestone was "within sight" (which BTW was 2.8) and I thought I was going to get it - especially with the euphoria from the crowd on the Reserves announcement (maybe we should revisit what are (bankable) Reserves and what are not). That milestone and continues to be based on fundamental valuation. The 2.6 - 2.8 range is a "stretched valuation" IMO given current data. Guess my greed for 2 pips cost me. But still it will bounce back IMO

A gap in my known data is from Pathfinder - which only has production data up to Apr 2014 filed.

Like you Gassed, "understanding of current plans" and "assumed" (which we all by now know makes an ASS of U and ME) isn't something I'm prepared to put a lot of faith in (nor would a lender I would have thought).

Anyway, back to "Reserves Report". ONLY ONLY ONLY are 1P considered as assets - the bankable reserves which have a 90% probably (or better) or being economically produced using technology available today.

Also from a SEC perspective (I guess only matters if you are looking at it from the lens of the SEC in the US), only "Reserves" that are to be (credible) developed in 5 years can be booked.

I've got some good research on how to look at E&P but most here would simply say AKK can't be measured on its fundamentals - to which I would argue that's bullshit - and we'd have a good discussion.

Focus on Proved Producing (which is a subset of 1P) and not 2P and certainly not 3P. Consider this commentary (I am not the source).

"...capital markets tend to look at proved plus probable “2P” F&D costs whereas we focus on proved producing due to a trend toward misleading data on the 2P front (in the context of fully funded equity). Reliance on 2P capital or F&D costs of business models has become more fraught with “danger” for the equity investor in recent years because the 2P F&D cost can effectively be managed or impacted by the manner in which the independent engineers and underlying producers approach the process of booking future drilling locations into the current reserve estimate. In recent years the rate of 2P reserve growth has vastly outstripped proved producing reserve growth. This is a critical nuance in that only the proved producing reserves are effectively fully funded whereas the 2P estimate is reliant of the spending of future development capital that likely fundamentally changes the current share count and net debt. Reliance on 2P estimates can effectively have the equity market discount an asset value that cannot actually be funded with the current share count or balance sheet."

"In short, too many E&Ps count on the stock market to accept the current 2P reserve report at face value on the basis of the current share count and current balance sheet when the actual delivery of a fully funded 2P reserve report would require a massive change in the current share count and balance sheet (suggesting an equity value proposition that is only a fraction of the one you would get if using the current share count)."

Is this sounding familiar? Isn't this what the "cap raising" poster are suggesting in a round about fashion.

That sort of "Reserves Announcement" missed the mark for me.


In a separate thread we were discussing things like cash flow and EBITDA and such ... well here's another concept applicable to E&P companies - "standstill capital" - i.e. how much must I invest just to keep production at current levels (remember we are fighting a decline curve in a shale play)

"For a capital intensive business, that is fighting a depletion curve, a critical screening method we need to consider is the amount of capital each business model needs to invest to stand still on a fully funded basis (proved producing not 2P). We innovatively define this as “standstill capital” and note that any generated cash flow that is in excess of this standstill capital is free cash flow via our definition."


In a summary context
"The fundamental reality is that one cannot assume that growth in revenue, growth in production or growth in producible resource has a linear relationship with growth in equity value or intrinsic value of an E&P company."

Incumbent on investor to "risk" the quality of every metric.

Also on the additional info numbers, pretty much in-line with what I'm using except I have a higher monthly LOE cost. I am not a believer in the 2 rigs and 1 well per month from HK in Birch (and show me the funding first).