Good on you for keeping watch. SSN did highlight sale as an option and at this time I thought that would be a clear signal that they were unsuccessful in either getting future funding or the property is not delivering the cash flow SSN needs to grow the business.
DONT FORGET the Enercom pres in Mar in Dallas where the CLAIM of IRR of 2,800% (yep almost three thousand percent) and payout of 2 months, followed by PUD economics for short laterals of 300% with payout in 2 months. Of course this is single well economics, which is the company's expectation and the main thing is G&A and Finance costs are excluded.
My point in reminding myself and thus y'all is the above would be some of the best returns on a project of anykind, anywhere. The reason of course is back to my capital efficiency argument and why I saw the acquisition of FB as "transformational" given the acquisition price and the low capital requirements over the short term to juice production and operating earnings.
And so it comes to sale time - to me it looks like a total sale of all Williston Basin assets, leaving SSN with some CPiPB (Cow Pasture in Parardox Basin), an exploration asset requiring $9.5M to drill a well with payout in 2 years ... and you all know how successful SSN has been with that type of asset.
Difficult (for me) to rationalize why you would change horses now - unless of course the horse you are on is flagging, and the bank says no more money for feed.
Awfully difficult to predict what the sale price is going to be. FB does have high oil % so that will help. The LOE might be higher than we think .... especially when water disposal added and I don't think we've ever been given a good answer on that issue.
My current thought is sell after sale price, especially if a good price is received. For simple math I'll say the PDP10 = $50M, overall 1P (PDP+PDNP) at 10MmBOE, 6MmBOE of PUD and total debt $24M
A sale $40M = ~$4/BOE of 1P PDP and 80% of PDP10 ... means PUD is free (no one believes its willing it pay for)
A sale $49M = ~$4/BOE of PDP and 80% of PDP10 ... Plus ~ $1.50/BOE for PUD (someone believes it worth paying to play .... pittance but SSN hasn't proven it .... were going to this summer but obviously have stepped back ...why?)
Those are low ball numbers .... the asset has its challenges.
At net to SSN (after customary revisions) asset sale of $45M less $24M debt leaves SSN with US$21M or about US$1.30 per share of cash and the rest of the company's assets at $0 assuming all asset retirement obligations go along with the sale ... so roughly 0.0065 cps.
I will be a seller at that price. No way would I trust TB with $21M in cash to create further shareholder value with a drilling program in their CPIPB.
Such is the way of the minnow.
SSN Price at posting:
0.4¢ Sentiment: Hold Disclosure: Held
