Costless collar - not enough
While it is good that they have a floor on the oil they sell, it is only for 200 BblPD, so each quarter revenue would be no lower than:
200Bbl/day x $55 x 90 = $990,000.
The best his collar delivers is if oil gets to $70, so
200Bbl/Day x $70 x 90 = $1,260,000.
While they are selling a little more than the hedged amounts, it looks like production is falling off and not adding much more to revenue.
The problem is that the company is losing money, and revenue is falling.
I think the company would be best off selling everything off before they end up losing all kinds of money each quarter.
Right now the company might be able to sell everything off and get out for near the current share price. Every quarter that goes on, revenue is going to decline, and the losses pile up.
Louis J. Desy Jr.
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