Replies to post #10371 on Supurva Healthcare Group Inc (SPRV)

[Phantom_Trader]

Gotcha....nice clarification!

[stratocasterca]

charlatan, you painted an extremely conservative view that is almost certain to be exceeded. (and by your design, for risk management purposes)

when one ponders any of your variables being closer to projected realities, the numbers are very much higher, of course, and when you consider speculative and momentum numbers, plus the raw increase in oil prices, even "sour" would be sweeter than molasses rubbed on a sow in heat in arkansas.

[Paras]

Great Calculation man!!! Even if it just reach 0.02, it will be great. Go WRNW go.... See you at 0.02+

[BullionNation]

$0.028 definitely is WORST CASE scenario in my opinion. When you look at the facts such as you have, it's so easy to see how ridiculousy undervalued we are.

Your projection is also using a maxed out A/S. If we were using the O/S and had a multiple of 10 Worst Case would be $0.056. In any case we should be at minimum 3x the current PPS and we should be there very soon IMO.

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"Initial production rates from the 119 wells drilled on the 320-acre lease ranged from 5 to 60 barrels of oil per day. The reserve report estimated that only a small percentage of the original oil in place under the lease had been produced. Estimates of remaining recoverable oil reserves range from a low of 600,000 barrels of oil to a high of 1,200,000 barrels of oil if complete secondary and tertiary oil recovery projects are implemented. Utilizing the current $60 price of a barrel of oil yields a recoverable gross oil reserve value of $36-72 million

So once the rework of each well has been done in theory from this one lease alone we will have 119 wells. We take 119 wells and multiply by 2.2 which is the average daily yeild of marginal wells in Oklahoma.

119 X 2.2 = 261.8

Now we take the current price of sour which is the worse posible product that could be recovered which is currently $51 a barrel. Now we subtract the known average per barrel cost of $20.96 from $51.

$51.00 - $20.96 = $30.04

Now we have our profit margin per barrel. We can now take our known daily production of 261.8 barrels multiplied by $30.04

261.8 X $30.04 = $7,864.47 per day in profit.

365 X $7,864.47 = $2,870,532.28 in profit per year.

Thats figuring only 1 lease and using the worse posible grade brought to market.

$2.8M / 1 Billion A/S = .0028 EPS X 10 = .028 PPS.

This is an EXTREMLY worse case scenario projection. So with the information we have avalible to us it's evident that the stock is fundamentaly undervalued. It's indepth DD like this that helps a person find that gem in the rough.

[lazyeye]

One of the best, most concise and clear posts on this board. Thank you.

[Fishdog]

[DeepBlue1]

Nice analysis Charlatan...I have a couple of questions though. One thing you mentioned in the analysis was...

"So once the rework of each well has been done in theory from this one lease alone we will have 119 wells. We take 119 wells and multiply by 2.2 which is the average daily yeild of marginal wells in Oklahoma."

Do we/you know the cost of each 'rework'? I have to assume that that would include the unplugging of the wells, equipment usage and the accompanying wages to be paid during the process, installing a wellhead/valve/pump, storage facilities and some sort of system to deliver the oil to market unless it's simply going to be trucked in and has already been included in your analysis.

Also, assuming every well is unplugged and produces the avg 2.2 barrels overall, how long will it take before this 'full production' level is reached? They can't do them all simultaneously obviously.

Also....what is the avg lifespan of these newly reworked wells? Is there some avg we can use to determine an estimated total production life/barrel count for each of them?

TIA

[Paras]

Reference : PR on February 12, 2007 - 11:14 AM EST
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Well Renewal to Purchase Lease Package in Northeastern Oklahoma
TULSA, Okla., Feb. 12, 2007 (PRIME NEWSWIRE) -- Well Renewal, Inc. (Pink Sheets:WRNW) has negotiated the purchase of a 785-acre lease package. The lease package is located in Rogers County in northeast Oklahoma. Numerous wells were drilled on the prospect acreage between 1960 and 1985. Production from the leases reached maximum levels of 4,000 barrels of oil per month during the 1980s. The wells were temporarily abandoned during the oil price collapse of the mid-1980s and the lease was abandoned by the operator. The Bartlesville sand was the producing horizon of the wells contained in the lease package.

Well Renewal expects production to be re-established in the wells contained on the 785 lease package after an extensive workover program currently planned for the leases within the next 60 days. Well Renewal will utilize the services of Pro-Formance Oil Field Services, LLC, a wholly owned subsidiary of Well Renewal. Pro-Formance will supply a workover rig to re-enter all of the wells located on the lease package to restore the wells to a producing status.

Will Gray, CEO of Well Renewal, stated, "We are extremely excited and energized with our newest opportunity to accumulate acreage within our operating region. This lease package has produced significant quantities of oil in the past and would still be producing today except for the collapse of oil prices during the mid-1980s, which caused numerous wells in our operating region to be abandoned. In addition to the wells to be re-entered and production re-established, our geological and engineering staff has identified 30 additional drilling locations on this lease package. We anticipate including these new locations in our 2007 drilling and completion budget. We anticipate production levels in excess of 3,000 barrels of oil per month from this lease package this year. Successful completion of the drilling and production of these new wells will add greater than $2,000,000 to the revenues and cash flows for Well Renewal during 2007."

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Now the MATH...

Lets Say: 4000 BBL per month
= 134 BBL per day
= 1.12 BBL per well per day based on 119 wells.

Now we take the current price of sour which is the worse posible product that could be recovered which is currently $51 a barrel. Now we subtract the known average per barrel cost of $21 from $51.

$51.00 - $21 = $30

Now we have our profit margin per barrel. We can now take our known daily production of 134 barrels multiplied by $30

134 X $30 = $4020.00 per day in profit.

365 X $4020.00 = $14,67,300 per year in profit.

$1.46M / 1 Billion A/S = .0015 EPS X 10 = 0.015 PPS

If that's the case then calculation comes around 0.015PPS. That is what it was trading at few days back.

Any idea? Will it ever hit 0.02 mark? Looks like its doubtful!!!

[trade2much]

Charlatan: very impressive extrapolation, thank you for laying it out!