A small oil producer can thrive in today’s market if production growth targets become far less important than generating free cash and earning returns. Bigger is not always better.
Our focus is on small properties that can provide big returns. This opportunity exists because many of these properties have been disproportionally discounted with the decline in oil prices. Oil has gone from roughly $100 per barrel to $50 per barrel, however many of these smaller non-core or neglected properties have gone from $100,000 per flowing barrel to $10,000 per flowing barrel. It’s a Buyer’s Market.
In addition to this, further benefits will be derived through the reduction of costs across all aspects of operations in combination with improved performance through new technologies. The oil industry has been forced to re-examine every aspect of the value proposition, the result of which is that in many cases these properties are more economic today than they were at $100 oil. We pay less and get more.
The point is that we do not have to wait for oil prices to go back up in order to achieve our objective. All of our increase in value will come from buying or drilling for properties in an environment of sub $50.00 oil. We know that in the current market we will be able to purchase undervalued assets or find conventional assets and develop them for less than $20.00 per barrel. If the price of oil goes back up to $60 or $70 per barrel within the next two years as the pundits predict its all upside for us but we are not relying on that to establish our objective.