Due to the decline in crude pricing there have been billions of dollars of “write downs” on GOM deep-water assets with the asset valuations falling below the accounting value on the balance sheet. This sets off impairment charges. I remember Gulfslope had around +4m of impairment charges on their 3rd Qtr. 2019 10-Q due to loss of oil and gas leases. I don’t think that will be the case this 3rd Qtr. 2020 since Gulfslope has the Anadarko Production on the VR block 375, the Canoe well drilled to a total depth of 5,765 ft. on the VR block 378, and more relaxed federal regulations in 2020 possibly applying to all three leases including GI block 102.
My point being about asset write downs, large Oil and Gas company’s GOM deep-water assets were becoming less cost-effective at $60/barrel at the end of 2019, so no surprise on the asset write-downs at $40/bbl mid-2020. The same would apply to shale operations.
But guess what, Gulfslope’s breakeven on their shallow-water drill ready prospects are less than $20/barrel, which should put them at a better advantage.
Stronger Oil and Gas companies are acquiring smaller Oil and Gas companies with low debt and market cap, or just some of their assets. For example, take Chevron acquiring Noble Energy recently. Everyone seems to be wanting a deal in this crisis, and maybe Gulfslope’s low break-even drill ready prospects could be the ticket for a potential working interest partner. They might have a better chance of getting potential partners than ever before.
Just my take on it,
Smith
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