This is what I mean by a proforma view. Used one of my base spreadsheets and put in the SSN specifics wrt production, costs, hedging etc. Before looking at the details, consider the following:
1. This is an estimate only and to be truly meaningful, requires data points only SSN can disclose if they choose to fully inform its shareholders
2. This is a FTM (Forward Twelve Months) view. It is a high level view on an annualized average basis. Given the volatility of the oil price its primary use is to show sensitivity to oil price of the covenants.
3. The credit facility is a TTM (Trailing Twelve Months) view based upon prior 4 Qtrs of reporting. The effect of this is effectively each Qtr a "a more positive" EBITDAX number is being replaced with the current Qtr's weaker number. You could simply take a TTM avg of oil price as a proxy to see what column in 2016 is most applicable.
4. One of the most significant variables is production. I've used what IMO is a reasonable estimate for 2016 production based on last reported Qtr and applying avg decline. Rob79 is you have a more scientific number from your models please supply and substantiate and I'll use that.
5. For the SSN+OAS production I've used 720 bopd for Oct 1 and applied a decline factor for 2016. I've added to that bringing on PDNP wells (which accounts for the additonal $1.5M of Capex). Ergo oil production more than triples.
6. LOE is the other major factor. Much of this is relatively fixed (in dollar terms) but increasing as boepd declines. I've put in an estimate of $4M pa for SSN BAU and $10M for the more than tripled production with the OAS properties. Like with G&A I've basically bumped it up by 25% only (on basis that it wont require that much more additional staff).
7. I used a Bakken differential of -$5 to WTI for realized price calcs
8. I have accounted for Hedges separately in the Rev calc - more so to point out as far as we know at present no additional hedging in place for the acquired properties.
9. "NM" is when EBITDAX is negative (and by definition fails the covenant test). Red cell means fail and Green cell is a pass.
10. This analysis shows clearly IMO that this acquisition is vital for SSN
11. This analysis shows just as clearly the decision MOB is facing. Effectively they need to "double down" on the BB and relax covenants (and for that I gave them an increase in interest rate to 4.75%).
12. Given the production assumptions and expense assumptions, WTI @ $50, or more specifically a realised price (before hedging) of $45 is the "magic number" for 2016. i.e. no covenant breach.
When SSN updates the market with a proforma that shows their costs and production estimates I'll review it - unless of course some can provide some further insight.
You could take this further and put in peer comparison and EV, 1P multiples to get additional insight.
Hope it makes sense. If anyone sees an error (and there always exist that possibility) please let me know.
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This is what I mean by a proforma view. Used one of my base...
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