SARA $4.83 talked with Saratoga IR, Brad Holmes today. We talked about Saratoga and some other energy stocks. He mentioned something that sparked my interest.
Saratoga operates in shallow waters governed by either the Parish system or the State of Louisiana. This is beneficial because they are not subject to the Federal bureaucracy and suffered no drilling ban during or after the Gulf oil spill. Holmes mentioned that even though many of Saratoga's wells have multiple zones, they are not allowed to coproduce these zones. They have to produce one zone at a time. The upside is that Saratoga has current gas producers that could be converted to oil when the producing zone peters out. The company has a choice when coming uphole on which zone to produce so they could easily pick an oil zone versus the next gas zone uphole.
Since many of these wells have long life reserves, it may not happen quickly but it does give Saratoga another cheap option to increase oil production.
He also emphasized that Saratoga has not only the ngas wells but also the infrastructure to produce these wells very cheaply. They are still making money at 3.30 ngas because rather than pay third parties, they have most of their own infrastructure and pipelines.
Another reason that I like Saratoga for a long term hold.
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