Geoff,
The 5,000 well acquisition target is roughly 3 years. It's hard to
give an exact estimate, since many factors effect the rate of
acquisition. For instance, the current situation in Iraq and the
concomitant rise in oil prices slow down the rate at which new wells
can be acquired Although, in the short-term, NuTek is actually making
more money from the wells it already owns, increases in oil prices
make the owners of wells, no matter how low-producing, more reluctant
to sell them. But, again, the ball-park figure is three years.
Now, to answer the question as to when to expect profits, given 500
well acquisition. The old equipment/materials can be salvaged at a
rate of 2-4 wells a day. 500 wells, then, will take anywhere from
125 to 250 days to recover the salvageable materials. NuTek tries
to buy wells at below the salvage value. In such cases, a well can
exhibit positive cash flow even before the end of salvage operations;
namely, 4-8 months after the wells is bought. In cases when the wells
are bought at a higher price, the well will become profitable later.
Basically, NuTek finds a figure of up to one year to be acceptable for
a well to show profits. |
