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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: MIRU who wrote (186751)	11/29/2014 12:07:04 PM
From: E_K_S	1 Recommendation Recommended By CommanderCricket Respond to 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

To: MIRU who wrote (186751)	12/1/2014 8:03:24 AM
From: Ed Ajootian	1 Recommendation Recommended By JimisJim Read Replies (1) \| Respond to of 206338

MIRU et al, thanks for your thoughtful replies. Even if there is no "HBP-oriented" reason to keep drilling oil wells, will the fact that a rig has been contracted until a fixed date into the future be enough reason to keep it going drilling wells that are uneconomic based on current oil prices? Or will the E&P companies try to negotiate with the drilling companies to just cut them a check today for what would in effect represent the drilling companies' present value of the net margin that they would have enjoyed if the rig had continued to be deployed for the duration of the contract? The latter would make the most sense IMO but it would take a lot of guts on behalf of the E&P company since they would stand to be second-guessed if oil prices were to recover before the drilling contract ends. Its interesting that you believe deep offshore is over -- I was thinking that that activity would remain in high gear since the lead times until production starts are so long. To decide to drill an exploration well for a deep offshore target now requires an estimate of what you think oil prices will be in about 5 years since it usually takes that long to get your field into production. WTI crude oil futures for Dec. '19 are at about $77 as I type. My hunch is that most prognosticators are expecting WTI prices to be higher than that by that point.