Message from John Q. Public on the Strictly Drilling thread:
Ed, I had some time to kill so I looked into PANA
1. Losses are going to be higher than expected
panaco.com
We anticipate an increase of $8-10 million in fourth quarter losses over projected amounts due
primarily to reduced reserves in the High Island 309 Field. An unsuccessful workover in December and
PANACO?s non-consent election on several projects proposed by the operator, which were also
unsuccessful, contributed to the property impairment and increased depletion.
NOTE: this is a company with just over $40 mil/year in sales reporting an ADDITIONAL 8-10 mil loss over expected losses.
2. Declining production and dry holes don't mix...
"Oil and natural gas sales" decreased 22% for the first nine months of 1999 primarily due to a 24% decrease in total production. Natural gas production decreased 42% in 1999 while oil production increased 44%.
3. They are hedging, quite a bit, and at very poor prices.
biz.yahoo.com
The Bank Facility contains certain covenants including a requirement to maintain a positive indebtedness to cash flow ratio, a positive working capital ratio, capital expenditure limitations and certain minimum and maximum levels of hedging activity.
biz.yahoo.com
In 1999 the Company's natural gas hedge transactions are based upon published gas pipeline index prices. The Company has natural gas hedged in quantities ranging from 7,300 to 37,300 MMbtu per day in each month in 1999 for a total of 8,770,000 MMbtu, at pipeline prices averaging approximately $1.99 per MMbtu, for a NYMEX equivalent of approximately $2.14 per MMbtu. The Company has hedged 218 MMbtu for each day in 2000 at an average pipeline index swap price of $1.87.
The Company has hedged a total of 540,000 bbls of oil in 1999 at an average NYMEX West Texas Intermediate equivalent floor price of $15.34 per bbl. The number of hedged bbls per day ranges from 232 to 2,232. Of the oil hedged, 1,000 bbls per day have a floor price of $15.00 per bbl and a cap price of $19.12 per bbl and another 1,000 bbls per day have a floor price of $15.00 per bbl and a cap price of $17.50 per bbl. If the NYMEX equivalent prices exceed the cap price for the period in which the Company has a cap price in effect, the Company must pay the difference to the company that effected the swap for the total number of bbls hedged. The Company has hedged 232 Bbls of oil for each day in 2000 at an average price of $17.35 per Bbl.
On December 31, 1998 the Company's open hedge positions had fair values, or estimated future gains, of $1.8 million, to be realized over the periods hedged. Due to increases in NYMEX future commodity prices since the inception date of the respective hedge agreements, as of September 30, 1999, the fair value of these agreements is a $2.1 million loss. A 10% increase in oil and natural gas prices would increase this loss to $3.1 million.
They hedged almost at the exact bottom. Oil and gas prices have increased what, an additional 30%-70% since 9/30/99? I am steering clear of this one. Q1 and 2000 losses are going to be phenomenal. Very good chance this company will fold or be taken over by the bank. |
