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"I estimate the PV-10% value of the El Halcón drilling inventory...

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35,472 Posts.

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27/06/14

07:47

Post #: 13578288
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Originally posted by cmonaussie ↑

Not that this can be substantiated by AKK nor would it be by HK....

Dialogue between (respected) author Richard Zeits and a "poster" Scooter-Pop

SP: "Z, Word from the patch has HK bringing in an Eaglebine exceeding 4000 bopd initial flow? Eye opener if true"

RZ: "Scooter-Pop, thank you for heads up. I have not heard yet. Is it an Eagle Ford well or Woodbine well?"

SP: "Not sure Z. Heard this speculation three times over the last two weeks from folks that I know to listen too! "

Now that would light a fire under the share price. The timing would be roughly right for either Nemo or Kaiser 2H one would think!

Although RZ's article was primarily about the TMS, he wrote the following

"In El Halcón, recent step-out wells that have started the delineation of the downdip portion of the company's acreage are outperforming the wells in the original focus area. This may indicate that the average well productivity in El Halcón may improve in the next twelve month"

"I should note that El Halcón still lags far behind the FBIR area in the Bakken in terms of drilling economics. By comparison, in the Eagle Ford Halcón spends ~$9 million to drill a "type well" with an oil EUR of ~420,000 barrels (~$29/barrel of oil on a net basis), while in the Bakken-FBIR a ~$11 million "type well" yields oil EUR of 687,000 barrels ($20/barrel of oil on a net basis). As a result, expected drilling returns are much higher in the Bakken-FBIR. That said, the East Texas Eagle Ford is still a relatively young play and further performance improvements and cost reductions would be logical to expect."

"Assuming Halcón is able to reduce its cost per well to $8.0 million from the current ~$9.0 million and using the existing 452 Mboe type curve, the play is expected to yield a 50%-55% well-level IRR, based on a flat $95/barrel WTI (the slide below). Using this guidance as a starting point, I estimate the PV-10% value of the El Halcón drilling inventory under a full drill-out scenario in the $1.0-$1.5 billion range. I assume ~500 high-graded drilling locations. However, significant upside to this estimate exists from EUR improvements and a larger number of future "Core-quality" drilling locations (Halcón estimates its potential inventory at 1,000+ wells)."

Something else to discuss...

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"I estimate the PV-10% value of the El Halcón drilling inventory under a full drill-out scenario in the $1.0-$1.5 billion range. I assume ~500 high-graded drilling locations. However, significant upside to this estimate exists from EUR improvements."

Interesting base case.
So applying this to "above average", 100 wells at higher end worth US$300m PV10.

Present Value of 30% to AKK = $90m?

Halve it and EFS is still worth some 2cps minimum.

AKK Price at posting: 1.2¢ Sentiment: Buy Disclosure: Held
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"I estimate the PV-10% value of the El Halcón drilling inventory...

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