With the BRK March Quarterly release yesterday we now have some useful data regarding BRK's first " development" well.
Being a development well and drilled for production/ cashflow purposes it's rather important for BRK and us shareholders that this well is successful..... early very positive indications from BRK's March 21 Wolf Pack announcement have been more than supported by the quarterly.
Wolf Pack produced 71,333 BOE in the first quarter ( ~6 weeks during it's flowback period) as per below.
View attachment 5243137 Of that 56,000 barrels were oil, ~8000 barrels were NGL's and 7333 BOE was natural gas ( shrunk gas after NGL extraction where 1 BOE = 6mcf gas). We know that the gas volume shrinks ~30% on NGL extraction, so the raw gas production to the gas plant before NGL's were extracted was 44MMCF/0.7 or 62.9 MMCFG. This gives the current early production NGL/ gas ratio of 8000 BNGL/ 62.9 MMCFG = ~127 BNGL per 1 million cubic feet raw gas production which is comparable to the HBP wells. The cumulative oil production ( green line) is marginally steepening at best or starting to straighten up , which means the well, at the end of March was still increasing the oil flow rate slightly or starting to approach peak. We can see the cumulative gas production( red line) was still curving up indicating that the gas production rate (and therefor NGL production) was increasing at the end of March which would suggest the well still had some time to go before reaching total peak production. ( if those trends continue).
From the OK county tax site we know that WP produced 14570 barrels oil in and 12.21 MMCF raw gas in FEB as per below.
View attachment 5243161So this implies for the full month of March, WP produced ~ 41,430 barrels of oil , ~50.7 million cubic feet raw gas (35.5 million cubic feet shrunk gas or 5915 BOE gas) ) and ~ 6400 BNGl for ~53750 BOE in total.
In terms of total BOEPD production for the month of March, the data shows Wolf Pack AVERAGED ~1336 BOPD, 191 BOEPD shrunk gas and 206 BNGLPD or ~1733 BOEPD in total .... and increasing so we can be reasonably confident that the IP30 rate when announced will be at least this number or almost certainly higher.
When we compare the Jewell, the best BRK well before Wolf Pack as per below....
View attachment 5243200We see Jewell IP 30 was 1604 BOEPD, but more importantly, the peak oil flow was 973 BOPD so at a march average of 1336 BOPD Wolf pack is smashing it out of the park. As previously mentioned , Jewell's best monthly oil production was ~26,000 barrels oil... it will take WP hopefully a good number of months before it declines from over 40,000 barrels per month to this level.
In terms of the June 2023 quarter production, going off the early trends from the production chart, we may assume April will probably be the peak for oil with decline thereafter. Gas possibly peaking May/ June so we may see a plateau with possibly a shallow overall decline starting May/ June. Now, as March production for Wolf Pack was shown to be ~53,000 BOE, this could mean the well may produce ~150,000+ BOE for the June quarter!... I'll be conservative and use 130,000- 140,000 BOE.
From the March 2023 quarterly report we can see the effects of the shut in's on production when compared to the previous quarter.
The production for the Dec 2022 quarter from the 3 HBP wells was as per below.
View attachment 5243221Dec 2022 quarter production was 160,022 BOE gross.
The production for the March quarter was as per below
View attachment 5243236Production for the March quarter was 164,000 BOE, actually up on the Dec quarter. This was due to Wolf pack contributing 71,333 BOE..... excluding WP, the contribution to March production from the 3 HBP wells was 164,000-71,333 or ~ 92, 667 BOE.
The effect of the timing difference between production and receipts is also highlighted here, where despite March quarter production being slightly higher than December higher, ( 164,000 vs 160,000) production receipts were from 119,000 BOE, ( no March WP contribution and then , timing differences between Dec 2022 production receipts included in the March quarter)
Now that the 3 HBP wells are back on line and producing at pre shutdown levels ( except for Flames which is still building ), if we assume that these 3 wells decline and produce 140,000 BOE ( down from 160,000 BOE in Dec) and add 130,000-140,000 BOE from WP, there is a good chance that production ( and sales) for the June quarter may approach 270,000- 280,000 BOE!
BRK received an average of US$52 per BOE for March quarter production. If we apply that number for the June quarter then BRK may gross (270,ooo-280,000)x US$52 = US$14-14. 6 million or ~ AUD$ 21-22 million ( US$0.67) in revenue.
If we use U$$ 57 per BOE ( BOE value will increase as the oil percentage of production mix will increase significantly as WP is mainly producing oil) then we may see AUD $ 23-24 million in gross revenue for the June quarter! This should set BRK up for another record year for production, revenue and profit.
In terms of the other news.
With the announcement of the independent reserves report, and the on market buy back, this has been a milestone week for the company and shareholders.
The IRR is hugely significant . This an independent third party, ( not BRK, not me or anyone else on this forum or anywhere else) essentially saying, and putting their name to it, that the SWISH asset is a material asset and have applied a value to it. Being independent, this valuation is conservative, very conservative. The value is calculated according to SEC standards and is foundational and bankable. US Oil and gas companies use their independent reserves report , and their banks use them, to benchmark reserve based lines of credit ratios. As a result , the banks increase or decrease the lending capacity based on those reserves accordingly . Significantly , the current valuation excludes land that BRK will add over the next few months as it pools acreage equivalent to a 20% increase in reserves and hence value.
Yes it is a valuation at a point in time, and will vary as commodity prices vary, but in BRK's case, whether it is 3c, , 5c or 7 c per share , we now have a look through valuation of the SWISH asset, ( not the company), and this highlights that the disparity between the share price and intrinsic value of the company is real, and significant.
On the back of this valuation, the board has decided, ( much to my personal delight) that a prudent and efficient use of SOME of the capital that BRK is now generating every day, should be used to capture that value disparity for the benefit of shareholders.
This is just the start.
Another great week to be a Brookie
Cheers
Dan
(20min delay)