Blackbird Energy (BBI-V) Remember just over a year ago when we introduced you to an energy play called Crocotta Energy (CTA-T)? We told you the stock had huge potential from its ~$2 share price and that you needed to get a piece of what could be a major success story. We realized the value and pounced on it right away and it turned out we were right. Crocotta was one of our biggest success stories of 2014 as subscribers watched the stock go from $2.26/share to a high of $4.85 and ultimately get bought out by Long Run Exploration (LRE-T). It's been a very long time since we told you we thought we have found its replacement but after following Blackbird Energy (BBI-V) and watching Garth Braun and his team create such tremendous value for their shareholders in one of the toughest oil markets in decades, we truly believe Blackbird is next. In my mind, Blackbird is one of the most undervalued energy plays in the market today and I have no doubt in my mind we could see the stock appreciate tremendously over the next nine to twelve months.
I have attached Garth Braun’s Executive Letter which he sent out to his contacts yesterday and I highly encourage everyone to have a read through it right away. Like I’ve mentioned before, I am a huge believer in the quality of Blackbird’s assets as well as their experienced and successful management team. Garth Braun and his team are second to none in the industry and I see the $0.355 stock price as being just the beginning of what could be a billion dollar company. Blackbird is well on its way to making it one of the most successful energy plays in 2015 so make sure Blackbird (TSXV:BBI) is at the top of your priority list… you will not be disappointed.
Best,
Etienne
Roasting Weenies on the Moon
We have successfully drilled and completed our first two Elmworth Montney wells on-time and on-budget; so easy to say, but so difficult to do. We completed both wells sequentially from the toe to the heel (meaning stage 1 of the first well, followed by stage 1 of the second well; then stage 2 of the first well, followed by stage 2 of the second well etc.); in this case, very difficult to say and to do!
The completion of our first two Elmworth Montney wells marks a critical transition for Blackbird; the transition from an early stage micro-cap focused on establishing a sizable liquids-rich Montney land position to a junior who must execute operationally and prove up the resource. We at Blackbird liken this event to landing on the moon, pitching a tent and roasting some weenies by the campfire (which, to say the least, would be extremely difficult without oxygen).
In this Executive Letter I will discuss our leading edge completion program, and perhaps more importantly, I will set out parameters for the evaluation of these first two wells as we proceed with flow-testing. I will then discuss our continued ability to gather exceptional talent for our team, and how we are still relevant at $45 oil.
Before I get into the thick of things though. I would first like to thank all of our stakeholders – this includes our shareholders, staff, neighbors and communities we operate in – for your continued support as we develop what I think is an exceptional asset and company.
Finished Completions and Ready to Roll
I entered a meeting this week and the individual I was to meet with commented on what he called my “Ear to ear smile”, and he asked me “Your completions are done and you are smiling, so that must mean great results”. I quickly rebutted that we will not know the results until we have flow-tested the wells, but what I could comment on was that the wells were completed as per our leading edge program, on-time and on-budget. In my humble
opinion, that is a great accomplishment for a company going through the transition discussed above, and it is a testament to the strength of our technical team.
In this market, Blackbird had a choice – preserve capital by sticking with the status quo for completions (such as wider spacing and a ball drop system), or implement a leading-edge completion program (utilizing shorter spacing, plug and perf technology, and multi-cluster perfs). It is likely not surprising to our shareholders that we chose the latter. We do not drill wells for the sake of drilling wells and performing science experiments. We drill wells to achieve exceptional results, and our mandate is to create value for our shareholders, not risk. While this did add incremental cost, industry analysis of our peers indicated that this type of completion program also had the potential to yield superior liquids recovery rates.
Completions went as per the program we designed, or put simply, we successfully completed both wells. The reason we liken this to pitching a tent on the moon and roasting weenies is because, compared to what was achieved when Blackbird was a non-operating partner at Bigstone, we pumped 700%-900% more propant into the reservoir, and our pumping rates were significantly higher. The interval spacing was also a significant change from what we had accomplished at Bigstone, where spacing was 100 meters between fracs. We used 40 meter spacing in our Elmworth Montney, effectively allowing the rock (resource) to be cracked much more substantially. This program as it was marks the transition for Blackbird into a Montney explorationist and developer, not just a smart “real-estate” play as some people have said. This is exciting stuff for our team as we begin to realize our goal of delineating the multiple zones of the Montney at our Elmworth block.
Our Evaluation Parameters
Comparing apples to oranges never really yields anything more than personal preference. With well results it’s no different, so a common denominator must be introduced. More explicitly, I want to lay out how we are going to evaluate our wells internally in the context of the greater region we participate in (Elmworth, Gold Creek, Karr, Kakwa). To be able to evaluate the wells in the proper context one has to first analyze the horizontal length of the well. In the region we drilled our two wells, there has been a substantial variance of well lengths ranging from 1,600 meters to as long as 2,700 meters – these differences can create substantial variances in gross results. For our first Upper and Middle Montney wells we went with 2,000 meter horizontal lengths. To compare our wells to a 2,700 meter well would be an improper comparison, so productivity per meter is the metric that will allow Blackbird to decide how good our wells are on a gross basis compared to other wells.
The next major evaluation component that will be analyzed is the CGR (condensate gas ratio). This ratio is the metric that answers “how liquids rich are Blackbird’s wells?” Our belief from the start has been that our land block lies within the liquids-rich corridor of the Montney, which typically yields approximately 100bbls/mmcf of liquids, and in some cases much higher. A success in this regard should start here – anything more than this would add further positive economic impact to the well. Below are two tables provided by Michael Zuk at Beacon Securities that show the economic sensitivities of an area based type curve built from wells in Elmworth and Gold Creek and uses $50 WTI and $3.00 Gas as the assumptions. What the tables do show is that at lower commodity prices, wells in the area can be still economic - which is encouraging for our wells.
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Overall the evaluation of the wells is much more than a total production number. These wells represent the beginning of our development of the Elmworth block, and we are confident that our wells have been completed to a level that will yield the liquids content we hope for.
Continued Momentum at Building Our Team
Everything that has been discussed so far in this month’s Executive Letter would not be possible without an exceptional team. I follow the Jack Welch theory on being a CEO: surround yourself with the best, brightest and most exceptional people and generally the company will become exceptional. In January 2015 we continued to build our team with the addition of Craig Wiebe as our Vice President, Exploration. Craig has had significant success and phenomenal experience in developing oil and gas projects, with a focus on the Montney in Alberta and British Columbia. Adding individuals to our team who share the same vision and passion for our company, with the technical and management ability to back it up, is a testament to our play, our philosophy and what we are building here at Blackbird.
With this addition, I take comfort that, as a geologist, Craig has had a long, hard look at our geology at Elmworth before he decided to join us full time. This gives me confidence that our Elmworth asset has the potential to become a substantial resource! When I look at the talent that has already joined our team I also like to think they join because our group truly enjoys working together. We have brought this company a significant way in a relatively short period of time, and there have been many evenings, weekends and holidays worked; but our diverse team has done this without (too much) agony, while also having a tremendous amount of fun. I have said it before – building a company is not easy, but with the team that we have assembled, we have the ability to create an exceptional company while also having a little bit of fun while we are it.
Does any of this really matter at $45 Oil?
YES! This resource is relevant at $45 oil. When Blackbird sought out to build a resource project we had a few fundamental beliefs: We saw gas as collared to the upside due to shale gas of the Marcellus, and high liquids content was needed to create superior economic returns. At our Elmworth play we see the potential for high liquids rates driving economic returns at even prices as low as $45 oil. This equates to Blackbird, once commodity prices begin to rise, becoming a low cost supplier of resource to the market. It is imperative to note that until we finish testing the wells we don’t ultimately know how economic these wells will be, but the fundamental belief is that our Elmworth asset can become a low cost supply to the market, with the ability to withstand commodity price fluctuations.
All this being said I want to end this piece the way it started. We have accomplished a tremendous amount over the last several months, and this has all culminated in our team successfully drilling and completing two wells sequentially on our property, on-time and on-budget. Results will follow, and in the meantime, I am going to take a moment to sit back and admire our roasting weenies on the moon moment. For about 3 minutes…we have a great deal more work to do.
Garth J. Braun
Chairman, President and CEO
Analyst Coverage:
Bank Analyst Rating
National Bank Dan Payne Spec Outperform
Jennings Capital D. Ricciardi Spec Buy |
