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Gold/Mining/Energy : Big Dog's Boom Boom Room

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CommanderCricket

To: MIRU who wrote (186751)	11/29/2014 12:07:04 PM
From: E_K_S	1 Recommendation of 206338

"...back in '08 there was lots of compulsory gas drilling to hold leases so rig count was kind of artificial..." Hi MIRU Do you know if 6 years later the same and/or similar terms are written into those NG leases that requires "compulsory" drilling in order to maintain their leasehold rights? I would think that the shrewd E&O drillers might try to write new leases that exempt them from that requirement. Are there other types of leases that do not require the "compulsory" drilling? Maybe some of the E&O survivors would be those that own leases w/o that constraint. These salient terms must be disclosed in the 10-K's. I am finding that the market is not efficient and some very wild price moves have occurred in companies w/ solid assets (usually land assets). As an example SFY is off more than 100% in the last 90 days. The only thing I can figure out is they do have a larger amount of debt but also have solid (and producing) NG reserves. They have sufficient FCF from their producing NG assets to pay debt while also doing some drilling but at a smaller level than previous years. I am not sure if their leases have "compulsory" drilling requirements but IMO there is no reason for the company to have it's market cap cut in 1/2 in the last 90 days. There was some discussion that they are less hedged on their "oily" side of their business, but I do know they have a long term contract (over 6 years) to supply NG to Kinder Morgan ( Swift Energy has agreed to a long term sales contract with Kinder Morgan Texas Pipeline LLC that is indexed to market and will be delivered to a new connection with the Kinder Morgan system. ) FWIW last time I checked, their NG production represents almost 50% of the capacity in that pipeline. I think the market is/has over reacted and if investors do a bit more digging into the specific contract terms that companies have for drilling and/or delivering NG and/or oil to their Midstream partners, that the commodity "price" risk is not as great as the market is pricing in. Big price disruptions can lead to big gains for the smart investor . . . Happy Thanksgiving to all. EKS

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