Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on July 22, 2013 at 2:47

Thanks for pointing out the per acre price.  The transaction gives GDP the option to keep a small fraction of the 185,000 acres at a bargain acquisition cost per acre.

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Permalink Reply by jeff on July 22, 2013 at 3:34

Would the transaction happen to include Indigo?

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Permalink Reply by Spring Branch,mineral owner on July 22, 2013 at 5:41

I think you have it figured out exactly right, Jay.   I agree that Sinopec is Goodrich's new deep pockets partner which could easily lead to a future joint venture on Goodrich's acreage.

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Permalink Reply by tc on July 22, 2013 at 5:24

As I pointed out in another tread.  Here is a little rough math, 750/bbl/day*80%NRI*66.7%WI*$100/bbl =$40,000/day in revenue or in 66 days the revenue could pay for the transaction, with decline curve it could be 100 days, but still a great deal.  You almost could say the acreage was thrown in for free.

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Permalink Reply by Skip Peel - Mineral Consultant on July 22, 2013 at 5:26

Good way to look at it, tc.

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Permalink Reply by HBP on July 22, 2013 at 7:27

I like looking at this way too, but my math came out with a much longer time for return on investment.  Also, I assume we need to factor in their WI portion of the production costs, etc...  Still may be a good deal and I'm hopeful for them.

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Permalink Reply by Oilman28 on July 22, 2013 at 11:49

66 x $40,000 = $2,640,000. With decline, I would guess you are looking at several years to realize a full return on the $26,700,000 transaction cost.

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Permalink Reply by tc on July 22, 2013 at 13:43

Math skills, eye sight (damn bifocals) all go down hill after 50.  Time to get out the gigantic calculator.  That's for catching my big error. 

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Permalink Reply by Skip Peel - Mineral Consultant on July 22, 2013 at 13:55

Okay, tc.  That's not a good way to look at it.  LOL!  Guess we share the same math skills.  Thankfully I'm not quite at the bifocal point yet.

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Permalink Reply by Steve on July 22, 2013 at 12:10

Is there anything in particular that suggests they may not decide to keep all or almost all the acreage?

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Permalink Reply by tc on July 22, 2013 at 14:03

Time and capital.  At closing GDP will have 320,000 net acres and I would assume it would take a large number of rigs to HBP all that acreage before lease expiration, most of this acreage has already been leased for 2 years or more, even including extension payments.  Here is another try at math:)  320,000 net acres divided by 1,000 acre units equal 320 net wells have to be drilled in the next few years to HBP all that acreage.  I think the most net Hz wells that GDP has drilled in a year is 40.  The big wild card is a JV partner with capital to fund GDP's portion of early drilling.  Even then I am not sure if GDP has enough internal human capital to manage a large drilling program.  I wonder if there are more pieces to this story that have not been announced.

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Permalink Reply by Steve on July 22, 2013 at 16:32

If they can complete enough successful wells in the next 2-3 years they will generate substantial cash flow , plus large reserves that would enable them to secure loans or other investment capital to keep a lot of that acreage leased at least until they can drill and hold it by production. They could also sell some leases to other operators like Devon did. Then again maybe Sinopec has all the money they will need. A number of things could happen. We will have to just wait and see. The value of their leasehold could increase substantially if the TMS continues to prove it is economic.

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