Energas Resources (EGSR) -- I have now built my position in this stock back up to nearly as high as it ever was. They announced first production in their Parkway project yesterday, which keeps them on the schedule they had laid out in the November OGJ article (see post to which this is replying for a copy of that). Right now they only have 2 of the 23 wells in production, but pipe has been laid for another 2 so I expect those would be turned on within the next coupla weeks.
Although the article says they could produce as little as 100 mcfd each, this is not only overly conservative (IMO, given that the wells tested at about 300 mcfd) but it omits the oil production. These first 2 wells should each produce about 20 bopd in addition to their gas.
Assuming an average production rate of 200 mcfe/d from the first 4 wells, I estimate that this project will reach payout of cumulative-to-date cap ex within around 7 months of the time that the 4th well is placed online. This assumes that in the first month of production for any given well the production would be fairly minimal due to the need to start it off with a tight choke so as not to damage the formation. Given that they have 23 wells to hook up in total, this project should be a huge winner for Energas.
Energas management has made a lot of mistakes, both on the field and off, in recent years. But I believe they have learned from these mistakes and are making the necessary corrections. For example, they recently hired some hotshot petroleum engineer to work on their Kentucky projects. Maybe now they won't try using plastic pipe for their pipelines? <g>
I had a big chunk of $.50 warrants that were due to expire on 1/31 and really wrestled with the decision of whether to exercise or not. I decided to exercise, and so far have been pleased with the decision.
Cautious investors may want to see some flow rates announced on these first 2 wells before buying this stock, and normally I would totally agree with that strategy. But another thing to keep in mind is that the company is planning a big hype campaign next month, which could push up the stock price pretty significantly before any flow rates get announced. |
