I could have been wrong on my last post. After market close Friday I dissected BDGR's PR and the referenced PR within it. Of course this is just my analysis of the situation, it's purely speculation, and
based on an oil price of $75/barrel. First, the Humble Project PR that was referenced on the Aug 27 PR:
OIL CITY, La., Aug. 3, 2010 (GLOBE NEWSWIRE) -- Black Dragon Resource Companies, Inc. ("the Company", "Dragon") (Pink Sheets:BDGR - News) is pleased to announce that Black Dragon will now earn up to 25% of
the first phase of the Humble Project by completing the first phase of the project which includes the drilling of the fifth well. Black Dragon intends to have the drilling rig onsite this week and have the
5th well completed within the next couple of weeks.
All 5 wells should be pumping within two weeks at which time the company intends to begin the EOR phase of the project. This phase of the project is projected to increase oil flow to 200-300 barrels of oil
per day, dramatically increasing cash flow from the project.
Black Dragon also has a Verbal agreement with one of the property owners to buy up to an additional overriding 7 1/2% royalty. On 200 barrels of oil per day, this additional royalty interest could add an
additional $53,000 per month to the bottom line. If the Humble project can produce 2/3rds of the projected barrels of oil per day, this would add an estimated $465,000.00 a quarter to Dragon. That figure
does not include the addition of Phase 2 and 3 which will add 10 more pumping wells bringing the total well count to 15.
Black Dragon also has a verbal commitment with one of the mineral owners to purchase a second 10 acres on the Humble Dome in which Black Dragon will have a 100% interest.
The Humble Project Engineer has done a reevaluation of the resources on the Humble Dome and has now increased the estimated reserves to be greater than 1.5 million barrels of recoverable oil in place.
Main Points:
- they will earn up to 25%
- we know the two week time period was innaccurate (crap happens)
- 200-300 BOPD
- if they can produce 2/3s (266.6 BOPD) of projection it would add $465K a quarter
- verbal commitment for 10 additional acres with 100% interest
- estimated 1.5M Barrels on property
266.6 BOPD x 31 days = 8264.6 BOPM x 3 mos. (1 qtr) = 24793.8 barrels/qtr x $75 = $1,859,535 x .25 = $464,883.75 (looks like BDGR's accurate estimate of $465K per qtr or $154,961.25 per month)
If the 1.5M barrels is accurate and they get 25% minimum of that: 1,500,000 x $75 = $112,500,000 x .25 = $28,125,000
Now the first portion of the Aug 27 PR:
OIL CITY, La., Aug. 27, 2010 (GLOBE NEWSWIRE) -- Black Dragon Resource Companies, Inc. ("the Company", "Dragon") (Pink Sheets:BDGR) is pleased to announce it has adopted a new method for putting additional
wells online. The company is going to spend three to four days with a cost of only $8,000.00- $10,000.00 per well. This new procedure increases the oil flow rate and extends the longevity of the well.
Thus far the 6 wells that have been turned on that produced 0 bopd are now producing 2-6 bopd. Black Dragon has almost 900 wells in its inventory and hopes to replicate the success of the 6 wells to all 900.
The company expects revenues to increase $137,910 a month within 90 days as additional wells continue coming online. Black Dragon's monthly revenue is estimated to grow to $350,000 by December 31 excluding
the Humble Project and other possible acquisitions. The company expects to continue to increase monthly revenue substantially as wells continue coming online over the next year.
The company is working with an operator and service company to use 3 rigs to turn on 7 wells a month per rig minimum but will speed up the process as cash flows increase as the result of a successful Humble
Project.
Main Points:
- 3-4 days per well at $8,000 to $10,000 per well
- 6 wells was at 0 BOPD and now at 2-6 BOPD (worst case scenario 5 wells at 2 BOPD and 1 well at 6 BOPD = ***16 BOPD*** -- Best case 5 at 6 BOPD and 1 at 2 BOPD = ***32 BOPD***)
- wants to replicate success on their 900 well inventory
- expects revenue increase of $137,910 a month within 90 days
- $350,000 monthly revenue increase by Dec 31 (excluding the Humble Project and other possible acquisitions)
- hopes to turn on 7 wells per month
Last week they possbly diluted around 750M stocks and possibly 125M stocks this week at .0001 (equates anywhere from $75,000 to $87,500). Could they really be adding shareholder value that would show a
massive increase in the stock price by the end-of-the-year and using dilution to finance the operation? If they drill 7 wells a month it would cost $56,000 to $70,000 per month using their estimates to
accomplish this.
Worst case scenario on the 6 wells: 16 BOPD x 31 days = 496 BOPM x $75 = $37,200 per month
Best case scenario: 32 BOPD x 31 days = 992 BOPM x $75 = $74,400 per month
Middle of the road estimate: $37,200 + $74,400 = $111,600 divided by 2 = $55,800
Now the 7 wells per month estimates using the 2-6 BOPD that they achieved on the 6 wells:
Worst case scenario: 18 BOPD x 31 days = 558 BOPM x $75 = $41,850
Best case scenario: 38 BOPD x 31 days = 1178 BOPM x $75 = $88,350
Middle of the road estimate: $41,850 + $88,350 = $130,200 divided by 2 = $65,100 per month for 7 wells
7 wells monthly until the end of the year plus the other 6 wells would equate to the following:
September: $120,900
October: $186,000
November: $251,000
December: $316,200
This was using the averaged out middle of the road estimates and it just fell short of their $350,000 monthly revenue increase by 31 Dec. Add these figures together with the Humble Project figures and by Dec
31 we could have a company earning $471,161.25 in revenue per month. They could very well be earning a minimum of $6M next year (provided the drilling rig makes it to the Humble site and everything else goes
somewhat as planned). If we say it's a $6M company and they fully dilute the 15B A/S we might be worth .0004, but if everything goes well I doubt see why they would do that. Future PR's should send us well
beyond that figure even if they do dilute to the max (provided they don't continue to increase the 15B A/S we're at now).
