RE: Expectations this week9 Jul 2019 14:08
I am pretty sure that there will be some sort of update tomorrow or Thursday. One downside to this being a team job now is that they have to sit together and argue out their various viewpoints until they come to an agreed position.
As I have said previously there is only so far that they can take this bunch of assets doing skimpy workovers rather doing something serious. In my view they should trade assets as a business stream.
Buy in unloved, neglected assets cheaply, work them over, optimise them, then sell them and reinvest the capital. Each time they do this iteration they should look to keep the operatorship on the field/wells. It should be possible to do that say three times a year. Acquire assets: month 1 switch them back on and decide a course of action, month 2 work them over, month 3 let them perform, month 4 sell. Once you get good at this, it should be like shelling peas.
Typically the operatorship is worth $1,300 per well per month with other revenue on top: so picking up the operatorship of say ten new wells every 4 months is good money. Over a 12 month period that would be $1,300 pm x 30 so $26k per month base revenue.
In my view at Austin they should follow this model. If they can sell Austin for $2mil that would be good money. The uplift can be redeployed into ZR and/or new assets. This is only my view and obviously the company might see it differently.
The problem with this model is that it is fiddley and messy. Drillers like to drill shiny, sparkly new wells rather than do the dirty stuff. The difference between a mechanic on a Bentley and a ten year old Mondeo if you like.
Historically, the operators of wells in Texas have been owners or part-owners, non-owner operators is a coming model and there are tens of thousands of wells to go for.
DYOR and only my view.
Sign In
Follow the stocks
