Indeed from oil barrel10 Dec 2014 13:21
Caza Oil & Gas, like Eland, represents a focused geographic play. In Caza’s case, the focus is on the Permian Basin in America, most specifically the Delaware portion of the basin where the AIM-listed company has drilled 26 successful wells back-to-back over the last 18 months.
The wells are targeting the liquids-rich Bone Spring/Wolfcamp play, which has delivered a stunning uplift in production (currently running at 1,200 bpd), reserves and revenues. These wells deliver high initial production rates – a best-in-class in the region from Caza, even beating IP rates of much bigger companies – and then steeply decline to average out at 200 bpd by the end of the first year.
This is profitable production: netbacks in Q3 were averaging US$51.43 per boe, which provides a comfortable buffer against the weakening oil price. “We are a very robust play even at current oil prices,” said CEO Mike Ford.
And Caza has taken action to protect its bottomline from the lower oil price: about 75 per cent of production out to 2016 is hedged, and, says Ford, “all of them are in the money”. One of the big headwinds on the stock, however, is not its ability to drill successful wells or deliver profitable production but rather concerns about its ability to service debt and access lower cost sources of capital.
“We are trying to lower the cost of capital,” said Ford, noting that a 15 per cent cost of capital increases the break-even cost of its Bone Spring operation from US$30 per boe to US$40. “We are looking at refinancing. We had one in place until the oil price started to fall. It’s still viable but I want to see how far this goes.”
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