A talk long overdue with GulfSlope
On Tuesday of this week we had a half an hour long talk with Mr. John Malanga, CFO of GulfSlope. Here's a short summary of what we discussed:
Due to the recent and large drop in oil prices, most companies are re-doing their capital budgeting for 2015 which has put a delay on things, "...some of these companies are VERY large companies and that's why this process takes quite some time". Of the 8-10 companies that initially started discussions with GulfSlope, all remain in talks. Only one company has said "no thanks" and that company was never on GulfSlope's internal list of candidates in the first place. Furthermore, that same company is not a big player/operator in the Gulf. Of the companies GulfSlope are in discussions with, most of them are very large ones. The larger the company the less price sensitive they are and "...the super-majors look on things with a 5-10 year time horizon".
GulfSlope is continuously doing work on their prospects in order to get them to the stage where they are drill-ready. As the prospects have progressed more and more, it has become clear that "our prospects work very well in a lower commodity price environment". GulfSlope has "a handful of prospects that are drill ready" and they fully expect to announce a first farm-out in Q1.
Strangely enough (and definitely not proven yet), it could very well be the case that the lower oil price actually makes GulfSlope's shallow Gulf prospects more interesting now due to its low cost structure in terms of capex and future production costs. "Our breakeven is much lower than shale players, we can drill in today’s environment and make healthy returns, even if prices continue to go down we will make healthy returns".
In terms of future financings, GulfSlope have "...no shortage of people that want to go and raise money for us". The company would like to raise more money for two things foremost, to bring more prospects to the drill-ready stage and to be able to bid for more blocks in the up-coming auction by the end of March. In GulfSlope's ~2.2 Million acres of seismic, "...we have found some additional opportunities that we think look as good if not better than what we already have". Management is focused on dilution and is looking at a number of different ways to finance the company. As the GulfSlope team is large shareholders, "...we are not excited about doing some sort of stock issuance at ten cents per share".
