CGrowth Capital Inc (CGRA)

[FSnow]

An associate asked a guy in the know in regards to Powder River Basin what was his unbiased opinion on CGRA. Here is his response.

I'm not familiar with this company, and can't seem to find anything on what their assets are. As for the press release you linked to, that is their only well in Wyoming. It is a very shallow Minnelusa test, which is a low gravity crude that often carries a significant deduct to WTI.
In this area, the Minnelusa appears to have natural water drive support, which means it will not need a manual waterflood like the Minnelusa typically does. That will help with recoveries and costs, as they won't have to drill a water supply well and injection wells. They will, however, have significant water disposal costs.
The fact that they set casing indicates that they found oil in a DST after drilling. The practice for the Minnelusa is to drill the well through the zone, run a DST(drill-stem-test), which is basically a packer and flow test tool which isolates a zone in the wellbore and opens that zone to the tubing, allowing for a short flow test/pressure test/fluid recovery for analysis. If the DST comes back with good oil shows and pressure, it typically means you'll have a successful completion. Log analysis of the zone helps understand what zone to test the DST with and also calculate potential volumetrics of oil in place. If it is thick on logs and has good oil shows, it should be a pretty good well. So, the fact that they set casing is very encouraging.
I'm not sure why they are acting like this was some monumental feat, however. The minnelusa is simple and easy to drill and complete, and the typical Minnelusa depth in the basin is 8,000'. This is only 5,700'.
All in all, they should be drilling this on seismic, as the Minnelusa formation is a sand-dune geologic deposit. Each dune/series of dunes is a reservoir, so it is structural in play. If they have a large dune structure identified, they may have other locations. In and of itself, one well here won't make or break the company, though it could have significant profit margins if it is a good well, as the Minnelusa, especially at this depth, should only cost around $1.3M to drill and complete.