Repost of an excellent post.
Posted by: xtrapink
In reply to: zguy who wrote msg# 9889 Date:5/4/2007 4:48:10 PM
Post #of 14333
zguy--BINGO!
i agree with your post 100% and i'm not here to bash the market makers...they want to make money too. They are using their tools to accumulate as many shares as they can at the lowest price that they can.
As longs, we should engage in the accumulation experience with as much vigor as they are. There is nothing bad in this PR. NOTHING!
There are, however, some EXCELLENT, QUANTIFIABLE points made in the PR that need to be emphasized, perhaps:
1. Hemi is in the final phase of acquiring even more leases in Woodson County. These leases will MORE THAN DOUBLE the footprint in Woodson County. These leases are adjacent to the current leases (that have crude occasionally bubble up from the ground). Think that will INCREASE Hemi's proven reserves... SIGNIFICANTLY? Most assuredly, I do.
2. Despite prolonged heavy rains, daily production of oil from existing wells continues and are expected to MEET CURRENT PRODUCTION ESTIMATES from existing leases.
3. Although it required a change in plans an logistics, HEMI HAS AN ALTERNATIVE to simply waiting for the flood plains of their Woodson County leases to dry out before they resume drilling--the Montgomery County lease.
4. In a relatively short period of time, Hemi will be drilling and/or reopening wells in the Mississippian formation that HAVE NOT BEEN TOUCHED IN OVER 25 YEARS.
5. EACH GAS WELL that they open/reopen is expected to produce 300-400 mcf per day--does $600-700 per day per well sound good to you? (Plus an unknown amount of oil to go along with that). PRODUCTION TO START IN MAY 2007...this month folks! (later corrected to $1575-2100 per well per day)
CORRECTED VALUES:
300mcf/day rev
x$7 per mcf
x 30 producing days/month = $63,000 gross rev
400mcf/day rev
x$7 per mcf
x 30 producing days/month =$84,000 gross rev
That equates to $756,000 to $1,008,000 per well per year GROSS revenue.
After you deduct taxes, service charges, pipeline hookup fees, BTU adjustments, etc (costs associated with selling the gas to the market) net normally approximates 75% of gross revenues.
Net Rev= $1575 per day to $2100 per day
Net Rev= $47,250 per month to $63,000 per month
Net Rev= $567,000 per year to $756,000 per year
Note: Associated Drilling costs need to be figured as a one time expense, and operating costs need to be considered when computing on-going profits.
Operating costs for gas wells are CONSIDERABLY lower than for oil wells as the equipment is more reliable and has less down time than oil well equipment.
ALL FIGURES ARE PER WELL in the Montgomery County target formation they mentioned in the PR.
Bottom line, if you were happy with $600-700 per day per well, you can be ecstatic at the more accurate figures of $1575-2100 per well per day.
Hmmm...now, just how many wells make sense???
Bottom line...RIGHT NOW it is all about the properties, and the company's ability to be nimble enough to meet production goals despite adversity brought on by Mother Nature. IN SHORT ORDER, however, when the sun bakes the mud until it is rock hard, I anticipate a FLURRY of activity that will increase production WELL ABOVE the levels that they are enjoying today.
The MMs can read too. They accumulating (as zguy correctly pointed out) by working in unison to get as many inexpensive shares as they can.
We should be just as smart and piggy back on their efforts and grab every share that we can at these levels.
The PR clearly points toward higher evaluations for Hemi in the FORSEEABLE future.
JMO,
xtrapink
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xtrapink
(long, strong and very pink)
