0001004878-11-000138.txt : 20110414
0001004878-11-000138.hdr.sgml : 20110414
20110413193814
ACCESSION NUMBER: 0001004878-11-000138
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20110412
ITEM INFORMATION: Results of Operations and Financial Condition
ITEM INFORMATION: Other Events
ITEM INFORMATION: Financial Statements and Exhibits
FILED AS OF DATE: 20110414
DATE AS OF CHANGE: 20110413
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SYNERGY RESOURCES CORP
CENTRAL INDEX KEY: 0001413507
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
IRS NUMBER: 202835920
STATE OF INCORPORATION: CO
FISCAL YEAR END: 0831
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 333-146561
FILM NUMBER: 11758057
BUSINESS ADDRESS:
STREET 1: 20203 HIGHWAY 60
CITY: PLATTEVILLE
STATE: CO
ZIP: 80651
BUSINESS PHONE: 303-591-7413
MAIL ADDRESS:
STREET 1: 20203 HIGHWAY 60
CITY: PLATTEVILLE
STATE: CO
ZIP: 80651
FORMER COMPANY:
FORMER CONFORMED NAME: Brishlin Resources, Inc.
DATE OF NAME CHANGE: 20071217
FORMER COMPANY:
FORMER CONFORMED NAME: Blue Star Energy Inc
DATE OF NAME CHANGE: 20070926
8-K
1
form8kitem202april-11.txt
FORM 8-K APRIL 12, 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 12, 2011
SYNERGY RESOURCES CORPORATION
-----------------------------------------
(Exact name of registrant as specified in its charter)
Colorado None 20-2835920
---------------------------- -------------------- -------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
20203 Highway 60
Platteville, Colorado 80651
-----------------------------------------
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (970) 737-1073
--------------
N/A
----------------------------------------
(Former name or former address if changed since last report)
Check appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below)
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-14(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operation and Financial Condition
On April 12, 2011 the Company issued a press release, filed as Exhibit
99.1, pertaining to its operating results for the three months ended February
28, 2011.
Item 8.01 Other Events
On April 12, 2011 the Company posted the Power Point Presentation, filed as
Exhibit 99.2, on its website.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Number Description
------ -----------
99.1 Press Release
99.2 Power Point Presentation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 12, 2011
SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
----------------------------
Frank L. Jennings, Principal
Financial Officer
EX-99
2
form8kitem202exh9914-11.txt
EXH. 99.1 - PRESS RELEASE RE QUARTER. RESULTS
EXHIBIT 99.1
Synergy Resources Corporation Announces Quarterly Results
Press Release
Source: Synergy Resources Corporation On Tuesday April 12, 2011, 2:37 pm
DENVER, April 12, 2011 /PRNewswire/ -- Synergy Resources Corporation
(OTCBB:SYRG.ob - News), a domestic oil and gas exploration and production
company focused in the Denver-Julesburg Basin (the "D-J Basin"), reported
results for the quarter ended February 28, 2011 (the "Quarter").
Increased Production:
Revenue for the Quarter was $2,053,534 or $0.0956 per share, up over 500% from
$335,725 in 2Q-2010. The improvement reflects the increase in the Company's
number of producing wells. As of April 11, 2011, the Company had 60 gross wells,
including 48 producing wells, and 10 wells in progress. All wells are located in
the Wattenberg Field of the D-J Basin. Net oil and gas production for the
Quarter was approximately 34,733 BOE or 386 BOEPD. As of February 28th 2011,
Synergy Resources had estimated proved reserves of 641,572 Bbls of oil and
4,313,939 Mcf of gas.
Increased Acreage:
Throughout the quarter, Synergy has significantly expanded its footprint in the
D-J Basin and as of April 11th 2011, Synergy had an approximately 116,000 gross
acres (100,000 net acres) under lease. This is approximately a 100,000 gross
acre increase from the same time last year. Synergy also is contemplating a
transaction with Petroleum Exploration & Management LLC to potentially acquire
interests in 87 producing oil and gas wells, one shut-in well and leases
covering 6,968 gross acres in the D-J Basin.
Improved Cash Position:
As of February 28, 2011, Synergy had cash of over $21,000,000 on its balance
sheet, up from approximately $4,700,000 as of November 30, 2010. The increased
cash position is a result of an increase in cash flow from operations and
$16,690,721 of net proceeds from a private placement of common stock in January
2011.
Financial Results
For the Quarter, Synergy had an operating income of $686,413 compared to an
operating loss of $130,438 for the same period a year prior. Synergy posted a
net loss for the Quarter of $11,738,360 compared to a net loss of $543,661 a
year prior. The net loss for the quarter included a $9,926,158 non-cash change
in the fair value of the derivative conversion liability and $2,514,045 in
interest expense. Frank Jennings, CFO of Synergy Resources Corporation, noted
"Our financial results for the quarter reflect approximately $12.4 million in
non-cash charges and interest expense associated with our convertible notes. As
of March 31, 2011, all of the note holders had elected to convert their notes
into shares of common stock, which will eliminate the non-cash charges and
interest expense after March 31, 2011. We look forward to reporting results in
the future that will no longer be encumbered by these charges."
Ed Holloway, CEO of Synergy Resources Corporation, stated "We had a record
quarter and I am quite pleased with our results. Our revenue topped $2 million
for the quarter, and we continue the upward trend as we bring more wells into
production. Having over $20,000,000 of cash and no debt on our balance sheet
will help us further implement our business plan. We will continue to look to
expand our acreage, reserves, and production in the D-J Basin in order to
maximize our shareholder's value. "
SYNERGY RESOURCES CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
February 28, February 28,
2011 2010 2011 2010
------------------------------------------------------
Revenues:
Oil and gas revenues $ 2,033,687 $ 335,725 $ 3,477,282 $ 388,511
Service revenues 19,847 - 27,289 -
--------------- ---------- ------------ ----------
Total revenues 2,053,534 335,725 3,504,571 388,511
--------------- ---------- ------------ ----------
Expenses:
Lease operating expenses 260,480 47,152 463,155 55,042
Depreciation, depletion,
and amortization 647,205 64,733 1,232,186 92,939
General and
administrative 459,436 354,278 1,111,979 635,410
--------------- ---------- ------------ ----------
Total expenses 1,367,121 466,163 2,807,320 783,391
--------------- ---------- ------------ -----------
Operating income (loss) 686,413 (130,438) 697,251 (394,880)
--------------- ---------- ------------ ----------
Other income (expense):
Change in fair value of
derivative conversion
liability (9,926,158) - (10,315,421) -
Interest expense, net (2,514,045) (414,136) (3,296,084) (414,136)
Interest income 15,430 913 15,891 3,686
--------------- ---------- ------------ ----------
Total other income
(expense) (12,424,773) (413,223) (13,595,614) (410,450)
--------------- ---------- ------------ ----------
Net loss $ (11,738,360) $ (543,661) $(12,898,363) $ (805,330)
=============== ========== ============ ==========
Net loss per common
share:
Basic and Diluted (0.55) (0.05) (0.73) (0.07)
=============== ========== ============ ==========
Weighted average
shares outstanding:
Basic and Diluted 21,487,951 11,998,000 17,580,331 11,998,000
=============== =========== ============ ==========
SYNERGY RESOURCES CORPORATION
CONDENSED BALANCE SHEETS
As of As of
February 28, August 31,
2011 2010
---------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 21,161,538 $ 6,748,637
Accounts receivable 3,962,054 3,176,320
Inventory 506,845 387,864
Other current assets 81,401 12,310
---------------- --------------
Total current assets 25,711,838 10,325,131
---------------- --------------
Property and equipment:
Oil and gas properties, full cost method, net 16,500,170 12,692,194
Other property and equipment, net 217,533 150,789
---------------- --------------
Property and equipment, net 16,717,703 12,842,983
---------------- --------------
Other assets 507,528 1,673,799
---------------- --------------
Total assets $ 42,937,069 $ 24,841,913
================ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 4,961,604 3,570,231
Accrued expenses 856,281 517,921
---------------- --------------
Total current liabilities 5,817,885 4,088,152
---------------- --------------
Asset retirem ent obligations 346,204 254,648
Convertible promissory notes, net of debt
discount 4,946,032 12,190,945
Derivative conversion liability 10,246,260 9,325,117
---------------- --------------
Total liabilities 21,356,381 25,858,862
---------------- --------------
Shareholders' equity:
Common stock and paid in capital 57,818,475 22,322,474
Accumulated (deficit) (36,237,787) (23,339,423)
---------------- --------------
Total shareholders' equity 21,580,688 (1,016,949)
---------------- --------------
Total liabilities and
shareholders' equity $ 42,937,069 $ 24,841,913
================ ==============
SYNERGY RESOURCES CORPORATION
OPERATIONAL DATA
Three Months Ended February 28,
--------------------------------
2011 2010
--------------------------------
Production:
Oil (Bbls) 19,511 2,857
Gas (Mcf) 91,333 19,480
Total production in
BOE 34,733 6,104
Revenues:
Oil $ 1,631,905 $ 198,392
Gas 401,782 137,333
------------------------------
Total $ 2,033,687 $ 335,725
==============================
Average sales price:
Oil (Bbls) $ 83.64 $ 69.44
Gas (Mcf) $ 4.40 $ 7.05
Three Months Ended February 28,
--------------------------------
2011 2010
--------------------------------
Production costs $ 55,471 $ 13,345
Severance and ad valorem
taxes 205,009 33,807
-----------------------------
Total lease operating
expenses $ 260,480 $ 47,152
=============================
Per BOE:
Production costs $ 1.60 $ 2.19
Severance and ad valorem
taxes 5.90 5.54
-----------------------------
Total per BOE $ 7.50 $ 7.73
=============================
About Synergy Resources Corporation
Synergy Resources Corporation is a domestic oil and natural gas exploration and
production company. Synergy's core area of op erations is in the
Denver-Julesburg Basin, which encompasses Colorado, Wyoming, Kansas, and
Nebraska. The Wattenberg field in the D-J Basin ranks as the 7th largest field
in the U.S. in terms of proved gas reserves and 9th in production. Synergy's
corporate offices are located in Platteville, Colorado. More company news and
information is available at www.SYRGinfo.com.
This press release may contain forward-looking statements. The actual results
could differ materially from a conclusion, forecast or projection in the
forward-looking information. Certain material factors or assumptions were
applied in drawing a conclusion or making a forecast or projection as reflected
in the forward-looking information.
EX-99
3
form8kitem202exh9924-11.txt
EXH. 99.2 - POWER POINT PRESENTATION
EXHIBIT 99.2
SYNERGY RESOURCES CORPORATION
DELIVERING ENERGY
DELIVERING RESULTS
April Corporate Presentation
Actual results may differ materially from those currently anticipated due to a
number of factors beyond the reasonable control of the Company. It is important
to note that actual outcomes and the Company's actual results could differ
materially from those in such forward-looking statements. Factors that could
cause actual results to differ materially include misinterpretation of data,
inaccurate estimates of oil and natural gas reserves, the uncertainty of the
requirements demanded by environmental agencies, the Company's ability to raise
financing for operations, breach by parties with whom we have contracted,
inability to maintain qualified employees or consultants because of compensation
or other issues, competition for equipment, inability to obtain drilling
permits, potential delays or obstacles in drilling operations and interpreting
data, the likelihood that no commercial quantities of oil or gas are found or
recoverable, and our ability to participate in the exploration of, and
successful completion of development programs on all aforementioned prospects
and leases. Additional information on risks for the Company can be found in
Company's periodic filings on Edgar with the US Securities and Exchange
Commission.
www.synergyresourcescorporation.com
20203 Highway 60
Platteville, CO 80651
970-737-1073
Stock Symbol: SYRG
Management
Edward Holloway
President, Chief Executive Officer, Director
Mr. Holloway has been a leading oil and gas executive in the Rocky Mountain
region for over 25 years. He co-founded Cache Exploration Inc., an oil and gas
company that drilled over 300 wells, and sold its assets to LYCO Energy
Corporation in 1987. He rebuilt Cache Exploration and sold the entire company to
Southwestern Production a decade later. He then co-founded Petroleum Management,
LLC and Petroleum Exploration & Management, LLC. Collectively, these companies
distribute over 25 million gallons of fuel annually and own/operate over 70 oil
and gas properties throughout Colorado and Wyoming. Mr. Holloway has particular
expertise in the Denver-Julesburg Basin, having served on the Board of the
Denver-Julesburg Petroleum Association. Mr. Holloway is also a past President of
the Colorado Oil & Gas Association. Mr. Holloway graduated from the University
of Northern Colorado with a B.S. in Finance.
William E. Scaff, Jr.
Vice-President, Treasurer, Director
Mr. Scaff has over 20 years experience in all aspects of oil and gas
finance, exploration, production and marketing. Previously, he oversaw financial
and credit transactions for Dresser Industries, a Fortune 50 oilfield equipment
company. After serving as a regional manager with TOTAL Petroleum, Mr. Scaff
co-founded Petroleum Management, LLC, in 1997 and Petroleum Exploration &
Management, LLC in 2001. Over the past decade these companies have achieved
significant success, and have operated oil and gas properties as partners with
some of the world's largest energy companies. He is a recognized leader in oil
field management and in operating wells to maximum efficiency and longevity. Mr.
Scaff is on the Board of Trustees of the Colorado/Wyoming Petroleum Marketers
Association. Mr. Scaff graduated from the University of Colorado with a B.S. in
Finance.
Board of Directors
Edward Holloway William E. Scaff, Jr.
--------------- ---------------------
Director - June 2008 Director - June 2008
Raymond E. McElhaney Bill M. Conrad
-------------------- --------------
Director - May 2005 Director - May 2005
R.W. "Bud" Noffsinger, III* Benjamin J. Barton*
--------------------------- -------------------
Director - June 2008 Director - September 2009
Rick Wilber*
------------
Director - June 2008
Introducing newest board member:
George Seward*
--------------
Director - July 2010
Prior to joining the Board, Mr. Seward was most notably a co-founder and Board
member of Prima Energy (formerly Nasdaq: PENG), guiding the company from
early-stage development to the sale to Petro-Canada for $534 million. Prima
Energy created tremendous shareholder value, for example $20,000 worth of
original stock in 1980 was valued at $3,000,000 at the time of sale in 2004. Mr.
Seward also serves as President of Pocito Oil and Gas (a limited production
company in Northeast Colorado, Southwest Nebraska and Western Kansas), President
of George Seward Alternative Energy, Partner in Schramm Feedlot (a 25,000 head
cattle feeding operation), Founder of Power Genetics (a cattle verification
processing organization), and holds his Colorado Real Estate Brokers License
(currently licensed with Cummings Realty). Mr. Seward graduated from Colorado
State University in 1973 with a major in Political Sciences.
* Denotes an Independent Director
Company Snapshot
Synergy Resources Corporation is an independent operator in the exploration and
production of crude oil and natural gas focusing on the Denver-Julesburg Basin
(the "D-J Basin"). Synergy identifies opportunities, acquires acreage, drills
and develops producing wells by leveraging its extensive experience and
relationships in the D-J Basin. Synergy Resources Corporation is a D-J Basin
Pure Play Operator with...
- Approximately 116,000 gross acres under lease (approximately 100,000 net)
- 60 wells consisting of 48 producing wells, 2 shut-in wells and 10 wells
in-completion
o Net Wells: 46.1
o Average Working Interest: 75%
o Synergy currently operates 88% of its wells
- Drilled and completed 36 wells under $500,000 cost per well
average
o Recently drilled 9 additional wells which are in-completion stage
- 200+ Lower-risk drilling locations currently identified
o In process of permitting 100+ wells in the Wattenberg Field
- Potential 20+ Horizontal Niobrara Wells in the Wattenberg Field
- Estimated 75,000 BOE reserves per Vertical Wattenberg Well
- Favorable oil and gas contracts in place
o Management has an excellent relationship with Suncor Energy and
Duke Conoco Phillips (crude and natural gas purchasers)
Creating Shareholder Value
Ticker Symbol: SYRG.OB ($4.70/shr closing price 04/05/11)
Values in (000s)
Cash (as of 02/28/11) $21,162
Market Capitalization (as of 03/08/11) $160,209
Shares Outstanding (as of 04/05/11) 34,087
Warrants Outstanding (wtd avg ex price $5.92) (as of
02/28/11) 15,247
Options Outstanding (wtd avg ex price $5.32) (as of
02/28/11) 4,270
Insider Ownership (as of 02/28/11) 23.4%
August 31 Fiscal Year-End
Reserve Engineer: Ryder Scott & Company
RECENT DEVELOPMENTS
Jan 12, 2011 - Closed on $18mm Private Placement ($16.7mm net) at $2.00 per
share.
Mar 21, 2011 - Closed on monetization of 2,384 net acres for $5,244,517 or
approximately $2,200 per acre.
Mar 21, 2011 - Closed on leases totaling 89,805 gross acres (approx 80,274 net).
Also acquired 5,724 acres at the Colorado state oil and gas auction.
March 31, 2011 - All $18mm in convertible promissory notes has converted into
common stock.
Recent Developments
D-J Basin Facts
o The Denver-Julesburg Basin (D-J Basin) is a hydrocarbon-rich area centered
in northeast Colorado that extends into southeast Wyoming, western
Nebraska and Kansas.
o The D-J Basin includes the Niobrara shale formation, which is showing
promise to be the next prolific horizontal resource.
o Relative to other producing regions, the D-J Basin is considered
a "Legacy Top 10 U.S. Field"
o The Wattenberg Field (in the D-J Basin) is the 7th largest field
in the U.S. in terms of proved gas reserves and 9th in production.
o It also ranks 18th in oil reserves and 26th in production with over 20,000
wells drilled.
o In late 2005, a change to 20 acre spacing in this field is estimated to
add an incremental 1.6 trillion cubic feet to the recoverable reserve
base.
Current Producers in the Wattenberg and D-J Basin
Some of the large independents active in the region are giving further
validity to the play:
o Chesapeake Energy Corporation (NYSE: CHK) - Market Cap 21.21B
- Recently sold part of their interest in the Niobrara for over
$4,800 per acre total consideration
o Noble Energy (NYSE:NBL) - Market Cap $16.92B
- Has 6 vertical rigs and 2-3 horizontal rigs in the region,
expanding to 5 horizontal rigs in 2011
o EOG Resources (NYSE: EOG) - Market Cap $29.34B
- Has 3 rig drilling program in the region and plan on 40 new wells
in 2011
o Anadarko Petroleum (NYSE: APC) - Market Cap $40.58B
- Plans to drill 470-500 vertical wells, 20-30 horizontal wells,
and refrac 500+ zones in 2011
o Petroleum Development Corporation (NasdaqGS: PETD) - Market Cap $1.10B
o EnCana (NYSE: ECA) - Market Cap $25.66B
o Marathon Oil (NYSE: MRO) - Market Cap $37.52B
- Entered into a joint venture with Marubeni Corp, in which a
subsidiary of Mauribeni will pay $270 million for a 30% working
interest in MRO's 180,000 net acres in the Niobrara formation
equating to roughly $5,000 per acre.
Source: Clouser, Gary. "The Denver-Julesburg Basin Delights." Oil and
Gas Investor, November, 2007. and company investor presentations
Market values as of April 4, 2011
------------------------------------------------------------------------
Wattenberg Field - D-J Basin
Niobrara potential exists in the entire basin, not just the Wattenberg
field
Synergy Resources Corporation 45 Wells Drilled (40 Completed)
o Wattenberg Field
o TK Farms Wells-Sec.36, T7N, R66W- 5 wells in production
o Northridge Wells-Sec.4, T5N, R66W- 6 wells in production
o Wiedeman Wells-Sec.32, T6N, R66W- 4 wells in production
o Meyer Wells-Sec.21, T5N, R66W- 7 wells in production
o State Wells-Sec.16, T4N, R67W -8 wells in production
o M&T Farm Wells- Sec.10, T6N, R65W - 6 wells in production
o Pratt Wells- Sec.29, T1N, R68W- 9 wells drilled (5 in completion)
Strengths of the Wattenberg Field
o Low drilling and completion costs
- Estimated $550,000 per well
o Rapid return on investment
- 8 to 18 month payback
o High success rate of drilling
- Over 99% of the wells in the Wattenberg Field are completed
o Rich in drilling opportunities
- 20 acre spacing
o Low lifting costs
- Less than $3 per barrel
o Natural gas rich in liquids
- High BTU content
o Long life production and reserves
- 30 years +
o Takeaway capacity has been enhanced in the Rocky Mountain Region
New Technology
Synergy Resources Corporation is at the forefront of applying new technology to
improve drilling efficiency, to reduce costs and to maximize well production
including:
o The use of directional drilling,
- reduces drilling costs, increases drilling success rates and
reduces environmental impact
o New well completion and stimulation techniques
- can triple the extraction of reserves over the life of the well
o New techniques to increase the flow rates of wells
- increases cash flow and investment returns
Source: Schlumberger Ltd.
Newly Acquired Acreage
o In March, completed addition of 89,805 gross acres (approximately
80,000 net)
o Also acquired 5,724 acres in Larimer, Park and Yuma Counties at
the Colorado state oil and gas auction
o Now one of the largest pure play D-J Basin acreage holders with
116,000 gross (approx 100,000 net)
Acreage and Well Growth
1Q/Nov. 2Q/Feb. 3Q/May 4Q/Aug. 1Q/Nov. 2Q/Feb.
2009 2010 2010 2010 2010 2011
--------------------------------------------------------
Gross Acres 7,210 13,301 13,461 13,517 19,792 116,000
Net Acres 6,670 11,075 11,118 11,174 13,556 100,000
Gross Wells 2 6 13 24 46 60
Net Wells 0.75 3.8 9.1 16.8 32.6 46.1
Revenue Growth Per Quarter
1Q/Nov. 2Q/Feb. 3Q/May 4Q/Aug. 1Q/Nov. 2Q/Feb.
2009 2010 2010 2010 2010 2011
--------------------------------------------------------
Oil $46,205 $198,392 $342,594 $854,372 $1,153,779 $1,631,905
Gas $ 6,581 $137,333 $264,659 $308,308 $ 289,816 $ 401,782
Wattenberg Vertical vs D-J Basin Horizontal Niobrara Well
Vertical Horizontal
D-J Basin Niobrara
Well Well
----------------------------------------------------------------
Cost to Drill and Complete Each Well $600,000 $3,300,000
# of Wells 5.50 1.00
----------- -------------
Total Cost To Drill & Complete Wells $3,300,000 $3,300,000
Est. Ultimate Recovery (EUR) Per
Well (BOEs) 75,000 300,000
# of Wells 5.50 1.00
----------- -------------
Total EUR in BOEs 412,500 300,000
----------------------------------------------------------------
----------------------------------------------------------------
Assumptions:
Oil Market Price $90.00 $90.00
Gas Market Price $4.00 $4.00
Mix of Oil 60% 60%
Cost to Re-Fracture Stimulate
(included in NPV) $150,000 $0
Assume Re-Fracture Every 5 Years Yes No
Net Revenue Interest 80% 80%
Production Tax Rate 11% 11%
Time Value of Money Discount 10% 10%
Gross Net Present Value $1,140,000 $7,543,000
# of Wells 5.50 1.00
----------- -------------
Total Gross Net Present Value $6,270,000 $7,543,000
Success Rate (Probability) 100% 60% - 80%
Adjusted NPV Using Mid-Point of
Probability $6,270,000 $5,280,100
----------------------------------------------------------------
Assumptions
o Does not include lease costs
o Vertical D-J Basin Well is modeled upon producing a single zone
Codell well with two refracs
Source: Beskow, Marty. Northland Capital Markets Equity Research.
February, 2011.
Summary
The management team has a very well-defined and clear plan for creating
shareholder value which includes:
- Continuing to expand our acreage footprint
- Utilizing an aggressive program of drilling oil and gas wells in
proven areas with a relatively predictable return and low-risk
history leveraging the management teams experience and expertise in
the Basin
- Leave the Niobrara potential behind pipe until the best practices
are vetted out by the larger players
- Move forward to a listing on a national exchange