plan vs actual

Reading the April Presentation, plan was to do 2 things

1. Achieve 1 mil Barrells over 640 acres

- Well spacings 40 acres

2. Total lease to hopefully prove up asset 4 mil barrells


1. Todays result has given us 260k barrel from 40 acres

I see there is potentially 16 spots available using 40 acres spacing. Obviously some areas may not be in play, so lets look at the 10 wells

Over 50% of todays oil was in the Wolfberry target, so 136k barrells of target 1 mil barrells in one hit

Obviously the maths is pretty easy - 136*10 = 1.36 mil barrels, just from target zone.

Variations would be expected on each well no doubt, but their data has proven to be on the money so far. Second well will start to give as an average to work from.

I think the excitement lies in the unexpected additional discoveries beyond the core target 124 k barells . If commercial, they will achive there 640 acre production reserve target in the first 5 wells

This creates some interesting funding options IMO

Two wells at say 140 BOPD each equates to $700 k per mth income before costs and royalties

Reducing to say $35 a barrel net of costs and royalties would see around $3.5 mil pa in the kitty

While insufficient to carry the full drilling program, it would fund interest and short term payback whilst further wells come on line

At 5 wells plus based on say an 8 week turnaround per drill site, the cash flow will fund further development

I know they were looking at a $15 mil facility, but it would be enough to fund the entire 10 wells. 2 are done, so immediately the amount reuired has reduced by say $3 mil

I think they only need around 50% - $7.5 mil in either CR or debt funding. This would get a further say 4 wells, plus admin costs covered, whilst production is brought on line

5 well may also prove a base case 136k*5 = 680 k barrells, or up to 1.3 mil barrells if the additional zones remain consistent throughout the drilling

Certainly appears to be potential for solid rewards to shareholders in the near term

2. One would think the knowledge gained from the current program should lead to some pretty acurate assumptions for the remaining acerage. Will be an interesting set of numbers I suspect