Whole lot of oil.
NiMin's proved reserves consisted of 3.7MM barrels of proved producing and 10.1MM
barrels of proven undeveloped (PUD) reserves. The company also has 9MM barrels of probable
reserves associated with its four Wyoming fields and its CMD operations in California. The PV-10 of
the company's proved reserves came in at $248MM or $17.97 per BOE. On a fully diluted basis, 75MM
shares, NiMin's PV-10 per share equates to $3.13.
Downspacing will set you free.
NiMin's Wyoming fields had historically been developed on 50-100
acre spacing. In fact, the previous owners of the fields had not drilled a new well in over a decade.
Analogous fields in the surrounding vicinity have been developed on 8-acre spacing. Wells in this area
are drilled vertically to 7,000-8,000 feet and target two separate intervals, the Phosphorus and Ten
Sleep. Drill and complete costs are running at $900,000 per well and can recover up to 200,000 Boe
per location. NiMin plans to drill up to 20 new wells in 2011 while also upgrading processing facilities.
We estimate that 2011 CAPEX for this region will be approximately $18MM for new wells and $4MM for
facility upgrades, which should result in the four Wyoming fields exiting 2011 at more than 1,500 Bblspd.
Further out we could see NiMin accelerate to 30 wells per year, taking these fields to a peak rate of 3,000
Bblspd in 2013. The company has approximately 45 PUD and 45 Probable locations identified assuming
14-acre spacing. Depending on well production results, the company could further downspace to 8-acre
spacing providing additional inventory beyond 2014.
Too bad oxygen isn't free.
In 2010 NiMin achieved a critical step in proving that its CMD process
truly worked. The Pleito Creek Field is currently producing approximately 260 Bblspd, which is 100
Bblspd over the natural decline curve of the primary production. This proof of concept allowed its
reservoir engineers to move approximately 1MM barrels of probable reserves into proved in this year's
reserve report. The next step at Pleito Creek, will be the installation of on-site oxygen generation. The
company currently trucks liquid oxygen from Los Angeles to the Bakersfield area. Now that the CMD
process has proven effective, the pilot project can turn into a full field development program. On-site
oxygen generation should cut the company's oxygen costs by 50%. We anticipate the next phase of
development at Pleito Creek to commence towards year-end as the unique nature of this equipment has
long lead times, as much as six months. We estimate 2011 CAPEX at Pleito Creek to be approximately
$3MM, with the majority of that CAPEX back-end weighted with the first modular oxygen unit slated
for 2Q12 operation.
Reiterate Buy, while raising our price target to $3.00.
In 2010, NiMin proved its ability to acquire
smartly in Wyoming and develop a patented technology that could revolutionize recovery techniques
in the San Joaquin Basin of California. In 2011, the company will look to harvest its Wyoming assets,
grow production and prepare for the next phase of development in California. We believe there is a lot
more in store for current and future investors. Therefore, we are reiterating our Buy rating while raising
our price target to $3.00.
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Above is excerpt from 2-28 update on NiMin by Global Hunter Securities. The full report can be downloaded from finance.groups.yahoo.com (need to join). There is plenty of upside to GHS' PT given that they are giving the upside at NiMin's Willow Draw field a risked value of a mere $8M. As I expect to be demonstrated as the year wears on, Willow Draw's upside value should be a lot higher than that. The first clue to this has already been given to us -- the fact that they are expanding the waterhandling capacity there to accomodate up to 1,100 bopd of oil production. For those of you scoring at home, that sort of production would easily produce well over $8M a year in cash flow, under even the most conservative of oil price assumptions. |
