ADI 1.60% $3.07 apn industria reit

some simple numbers

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    If wells flow as hoped from the Eagle Ford, this field provides high NPVs due to the condensate ratio and high early flow rate curve. While there are many numbers we can look at, without getting too complex and digging deeply into costs we can quite easily do a comparison with the Petrohawk numbers. Using the numbers quoted and assuming they are profitable on their poorer liquids ratio (50bbls vs 250bbls), and with reserves per well of say 5bcfe in each area (and that the cfe equivalent number is based on 1 bbl oil to 6000cu ft), then 5bcfe equates to 500,000bbls and 2.0bcf gas in our area, vs 192,000bbls and 3.8bcf in theirs. Using US$70 oil and $4 for gas, for ADI’s 10% (post farmout assumption) we get US$1,400k more revenue at the wellhead per well than Petrohawk, and multiplying that by 230 wells at 100 acre spacing is not too shabby. i.e. $322,000k or around $2.20 per share. After royalties and pipeline tolls, this goes straight to the bottom line. And that’s only the difference in revenue at the well head, not total profit. No real need to discount this figure given oil prices will probably climb higher and the high early production rate.
    The other nice aspect about this area at this time is it’s not very sensitive to the gas price due to the high liquids content, yet we will benefit from the low drilling and completion costs that are being caused by the low gas prices.
    If we can successfully get the three completions and say 3 successful new wells from the farm out, it would be a great deal and the field will be easily self sustaining cost wise with no need for further capital raisings. Development drilling could proceed at a rapid pace.
    So, as usual, the risk is in proving flow rates, and this seems to becoming more and more derisked with each new well drilled on the play.
    Would appreciate someone checking these numbers for accuracy though as there could be flaws in my first run.
 
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