Re: Results for Qtr ending Dec 31
Very good report.
The results are within the range of what could be expected - and actually beat my estimate.
The sidewinder facility was commissioned around Oct 31. They would have ramped up slowly as they connected wells and tested equipment.
I think the upgrades for the Cheal facility were done in December. Some of the upgrades and work at Cheal might have caused some brief shut-ins and etc. They were also adding lifting capability and doing workovers so production would have been low during that period due to the work. The Cheal-B5 well was finished in December. According to the report, "The B5 well was put into production at the beginning of December 2011 and averaged 1,010 barrels of oil per day from the time the well commenced production in early December to the end of the third quarter. As of the date of this report the Cheal-B5 well is naturally producing approximately 1,270 barels of oil per day."
In the prior quarter, they were producing 665 barrels of oil and increased to 970 barrels. Natural gas went from 159 boe/d to 1062 boe/d - or an average of about 6 mmcfg/d.
Yesterday, I think the report probably leaked and that is why the stock price dropped. Given the amount of production that everyone was counting on - with 6,000 boe behind pipe according to Tag Oils' presentation, many probably expected more production this quarter. My own estimate from January 5th was that they would have about $12 million in sales. They actually did better than my estimate and had $12.9 million in sales. My prior estimate:
"The company estimated that they would exit the year 2011 with 4500 boe (60% oil and 40% natural gas). My estimate is that they average 1500 boe for the quarter (they got new production facilities and upgrades done towards the end of the quarter). Tag estimates that they will have about 6500 boe on line by March 12.
The quarter ending March 31, 2012 will probably average over 5,000 boe. My estimate is that the quarter ending Dec 31, 2011 will have $12 million in sales (up from the prior quarter's $7.2 million). The big change will be in the March 31, 2012 quarter where they could get $40 million in sales. " (link)
They have finished drilling the Cheal-B6 and Cheal-B7 wells. No surprises there. Those wells are probably average 200 to 400 boe/d type wells.
"• Cheal-B6 was drilled to a depth of ~1800m encountering 15 meters of net oil-and-gas pay within the
Urenui Formation. Cheal-B6 is cased and awaiting completion and testing.
• Cheal-B7 was drilled to a depth of ~2100m encountering 23 meters of net oil-and-gas pay within the
Urenui and Mt. Messenger Formations. Cheal-B7 is cased and awaiting completion and testing.
• The Cheal-A9 well targeting the Urenui Formation has commenced drilling operations as of the date of
this report. "
