Montney Overview and Companies Discussion

hey welcome everybody a uh very happy and uh delayed New Year I’ve been a while since we’ve had one of these Sunday sessions so I appreciate everybody uh joining us here again in 2023 um kind of a different different way of doing things this year 2022 was mostly company specific stuff uh we went through 40 45 different companies and then uh the junior sessions obviously that were another uh 15 or 20 companies uh was was more so focused on that 2023 I want to move more towards the overall uh overview of the different basins a bunch of engineering topics and uh the um kind of other special situation uh opportunities that I would like to discuss um kind of more in detail and uh yeah just some just some overall outside Canada stuff too so I’ve got some sessions planned for multinationals and what they’re doing um the Colombian Market is is really interesting what they’re doing in the Argentina Trail as well so I will let me start him here so so kind of a different different tone here I will still be updating the company specific stuff uh as much as possible but a lot of that will now move to kind of the Twitter spaces and maybe um specific sessions that can just have updates on uh maybe all the companies all at once and and do some kind of Petro ninja well well updates and just overall updates kind of like the Q3 preview session was but but maybe a bit more uh in detail here uh I am still kind of a bit uh I guess suffering from this uh a stomach illness so apologies if if uh I got a uh there’s some sore throat and all this coming in um but yeah so so that’s kind of the plan this year uh we’re gonna get started today with a modney overview and discussion obviously the Monte Basin um in in Alberta North Northwestern uh Alberta and the Northeast BC and the goal here is is not to compare companies to each other and and talk about you know this company has the best world results that that doesn’t really apply in the modern need because it’s so Diversified as in there is uh oil rich areas there is condensate rich areas uh you have this like NGL Rich a gas and then there is the dry gas the further north you go so it’s very difficult to compare uh well by well results when when they don’t really make sense um as well the the depth of the formation changes uh quite significantly uh throughout the Basin so so you’re kind of comparing apples to oranges where the well costs uh differ a lot and they can depending on where your drill in so assuming more and more of an overview a bit of a history on the modney where we are a little bit on the geology and then we’ll get into some company specific kind of information and uh overall based on specific information that I think is important for anybody investing in companies uh to kind of keep in mind maybe just just just have a look and follow along with um so just before I begin here I again I just want to re-emphasize that um this will be recorded uh it is going to be available on the website as well as on YouTube so everything stays the same nothing really has changed I’m gonna try and get this up here as soon as possible Zoom was having some sort of glitch um last three months of last year but they seem to have fixed it so I hope everything here is gonna go well I also have the mailing list where I just all I send out is the event links um kind of a day or two beforehand and then any relevant files as well so if you do want to get on there uh just just shoot me an email or a Twitter DM I am running quite behind uh on the emails right now as well as the DMS just after the holiday season under this little sickness so I’m gonna be trying to catch up here as much as possible and um my uh schedule for the future sessions is also on the website along with the portfolio so the portfolio is still on the November uh I know that so I will update that kind of midweek here uh with the latest there has been some some changes for sure uh including all the bigger names and the smaller names so so definitely I look forward to updating that here uh call it Wednesday thursday-ish um I also received a couple emails about those scam Bots that are on Twitter so I don’t sell any mentorships I don’t charge for any content um there’s the there’s no no uh a private Discord or Whatsapp groups or anything like that so uh please don’t don’t give your information uh to anybody uh because that’s it’s it’s those Twitter Bots and I I wish they could get rid of them but uh I’m not sure why they’re having problems I’m just doing I guess simple stuff like that I also mentioned earlier I did order a mic So for anybody who’s maybe um uh I guess worried a little bit about the echo um that will be here uh or it came in this morning but I didn’t get a chance to set it up um we also added uh Auto closed captions on the YouTube videos as people had suggested so please keep the suggestions coming um anybody who wants I guess anything done a bit different or you have other suggestions for other seminars that that maybe you would like to see I always welcome that uh it’s it’s very difficult for me to to figure out what’s happening because I don’t re-watch my uh recordings so so if there is something in there that’s a mistake um or or can be fixed adjusted made better please just let me know uh okay so a couple things before I start and I want to make this uh quite clear again is please do your own due diligence what I share is my information it’s my opinion it’s based on my interpretation of what’s going on that that may not mean that it’s always going to be 100 correct and that may not mean that all the companies are going to go 10 bagger in a year so there is a a specific um a sort of due distance process that I go through and I try to share as much as possible that being said I don’t share every single thing because I would just be recording myself uh 24 7. so please once again do your own due diligence and and please just watch watch the the information that I share some of the information is delayed after I’ve entered certain names um previously so just keep that in mind um you know this is not this is not a free-for-all thing where you can just copy it and uh everything is gonna work out and you’re gonna get the exact same uh performance or anything like that uh so so just keep that in mind also keep in mind your risk tolerance so I have been at the oil and gas investing for about nine nine almost ten years now so there’s a specific sort of not not just a risk tolerance that’s built but a different sort of um call it mental mindset that’s built around these names and the volatility that comes with it oil and gas has always been volatile always uh even in the down Cycles from call it 2015 onwards there were companies that were down 60 70 percent in that time frame their companies are up in that time frame so it’s it’s not just related to oil price there are other factors um that are happening as well to keep in mind uh the other thing I will say is please keep in mind your position sizing and your portfolio construction so I run you know people know this I’ve I’ve shared this I run a margin portfolio it is always in margin and I also have options in there and I also have Junior companies in there so um it’s a different portfolio construction than maybe a lot of people are are doing and I also size my positions uh as kind of things come in uh as the macro uh might be on the macro and then and then as the opportunities kind of against each other so relative basis valuation it doesn’t mean that everybody should be running these sorts of portfolios so um you know entering entering the commodity trade is is not easy uh as much as it seems like there’s there’s all these uh you know huge opportunities and companies have gone up X percent in in three months or six months it’s not representative of of how commodity Cycles go there there’s a definite not only an investment criteria component but a Time component these are not your regular businesses these are businesses that are maybe front loaded capex heavy in the case of mining where you put in x billion of dollars or CMD where you put in x billion of dollars up front you don’t get first oil till four or five six years down the road so there there’s definitely a a timeline and a gap uh component there it is the same for any other conventional uh oil play where there is a drilling leg there’s a completion’s leg there is a leg for the wells to clean up there’s a well uh lag for the wells to stabilize on production um there’s a timeline to it Rome wasn’t built in a day and neither are oil companies so looking at stuff from a six-month time frame or a one year time frame in a quality growing commodity-based business it’s just not the right way uh to be approaching these Investments so that’s my view that’s why I say that I invest for the longer term I’m I’m not out here day trading and trying to pick off scalps uh uh or trying to time these things uh I invest in good companies based on a macro Outlook and then kind of just let that play out over a period of time and adjust accordingly as things change so I can’t take questions on Zoom right now so uh if you can just put them in the chat and just to keep the natural flow of how things are going here just put them in the chat I will I will kind of respond to them as I go and if it’s something completely off topic uh I’ll leave it to the end and then and then get to it it’s just for the sake of security we’ve had issues in the past with these zooms getting hijacked uh and I don’t want to end up on a tick tock as one of those um uh you know videos of funny videos uh per se so that’s where we are so we’ll get started here and um before I begin on the monthly specific stuff I want to give two charts on the overall macro because we haven’t chatted about um kind of overall oil prices Where We Are here is the end-all be-all chart of inventories so this is as of January 11th uh about seven or eight days ago um before I begin anybody on the Twitter space that would like to join for the zoom visuals white tundra.ca the website is also in my Twitter bio thing and if you scroll to the bottom under events the zoom link is on there and you can join us for the visuals as well so so this is kind of the the end-all be-all chart here on inventories this covers crude oil products every single type of NGL propane butane it covers sprs and it covers floating inventories and it covers intrinsic inventories so any ships that have oil that are loaded they have gasoline they’re loaded they’re taking them somewhere else so as you can see there’s nothing here that shows me that there’s anything to be worried about I see posts that are I suppose that are saying that there’s a huge build in uh and call it um China there’s this huge build offshore that Russia has stuck in all these barrels there’s this a build off the coast of Iran so excuse me a sec I’m gonna fix this there’s somebody keeps trying to control the screen here so Okay so um so as far as the overall inventories goes not really seeing a concern I am also presenting on the overall macro here next week so I will share more as to why this is an even bigger um sort of bullish sign because what we’re seeing is that the uh high quality products are drawing and the low quality products such as your ngls and your propane’s uh a petrochemical feedstocks are the ones that are building so so even though the inventories overall is relatively flat you’re you’re seeing this shift and I’ve used this example before it’s it’s like it’s um you know you you had a fridge that was half beer and half water and then now now you want to drink beer and you open the fridge and all of a sudden it’s only 25 beer and 75 ended up as water so so something like that uh is is kind of where we are um but but I will explain that more more on sort of the macro stuff uh next week there so overall the inventory is lower than it was at the beginning of 2022 once again this includes spr commercial floating um in transit Etc looking pretty good and uh keep in mind this is this is with the FED funds rate up for four percent um in the last year this is with everybody scared of recession this is with people supposedly jacking up credit card debt and losing jobs and all this and uh we’re we still seem to be in a pretty good place I don’t want to make this a macro session so I’ll talk about it next week uh more in detail here’s your three two one crack spread so three barrels of oil converted into two gasoline one diesel that’s your three two one crack spread it’s rising so anybody worried about the demand for end products here’s your uh here’s your end-all Beetle for the refined product space so this is rising and this is despite the Chinese refineries kicking on and all this all this discussion that China is going to flood the market with diesel and gasoline hasn’t happened yet and one of the reasons for this is that jet fuel comes out of the same distillation column as diesel so as the world’s jet fuel consumption is increasing very rapidly the overall sort of diesel jet fuel is getting a bit pinched at the same time gasoline consumption remains relatively high in the rest of the world in the US it is a little bit below uh kind of seasonal norms but on the overall uh globally we’re still looking pretty good and this is not just the U.S Gulf Coast crop spread this includes the Middle East the Mediterranean Europe and then as well the kind of the Singapore Market as well so there’s a there’s a lot of new refining capacity that’s come online and will be coming online uh keep in mind that the us is going to have a major turnaround season this year because a lot of them skipped turned around last year to take advantage of this exactly as you can see on the chart uh we see that crack spreads last year had really blown out so companies tried to push maintenance over and um well now now they have to do it uh or else you can have more fires and explosions uh like we kind of saw last year as well so inventories are looking good demand is looking good and if that’s the case then obviously you don’t have an oversupply anywhere uh so so kind of given that and my other thoughts on where China is uh where Russia is yeah and kind of how the us is going to respond from here I think um you know my my portfolio update will reflect a bit of more aggressive added on risk that I’ve taken on in the last call it um four to six weeks uh yeah given Where We Are so we’ll get started on the montney here so this is this is where our montney unconventional gas slash oil a fairway is we see all the different uh kinds of plays here you know excellent map by Peterson cohere you see the Legacy uh unconventional sort of gas basins here horned River and the liard basin but I see the oil sands uh Peace River Charlie Lake an upcoming play in the Grand Prairie area uh kind of important because it is competing directly for Capital and uh not capital for labor and supply chain so being in the same area as a Big Oil oil Hub it is going to increase the inflation to the Grand Prairie based producers um as well as sort of affect the supply chain as far as water disposal oil peroxide Etc now we see the whole deep Basin gas uh a fairway here the Duvernay cardium you know a lot of companies that people here are invested in you likely recognize these areas the clear water and other up and coming area and then you have your kind of Southeast Saskatchewan including the Weyburn unit and uh your biking trend so this is the area excuse me we’re going to focus on the um so there’s a bunch uh okay just give me a second I got somebody here posting uh all kinds of stuff so yeah okay um that’s interesting they must know it’s a new Zoom link so uh now they can come in and post all kinds of trash um okay so I also see that Dirk said here that the zoom link on the website isn’t working uh so I’m not sure what exactly but the but the ID and the passcode does so uh please just use that for now because um it’s just gonna take take me a while to go and update that um while I’m doing this so anyway uh pretty good map like I said we’re focusing here here on Northwestern Alberta and then Northeast BC the two big cities Grand Prairie and for St John uh the ones to focus on as kind of where the activity is going to be so um a little bit more on exactly who owns the land so we see let’s look at the Northeast BC first the north of Northeast BC so um tourmaline huge producer in this area we have conical Phillips who bought this uh out of kelt uh in 2020. we have art Resources with their Apache yet to be sanctioned but as you know we had some good news on the blueberry River First Nation uh decision here last week so keep your eye out on this we have Pacific Cambrian as well who are kind of your your LNG participant if you will and your Patronus and and look at look at the development of Patronus just keep this in mind we’ll discuss this as things go on they have maximized reserves progress had before they sold the super Patronus proved out the entire acreage and you can see how the development is versus the development in maybe some of these other areas that is a more call it full-scale field development versus what is here a exploration development and delineation development so when you look at your companies just try and look at the maps and see what they’re doing if there have wells absolutely side by side that’s a full-scale field development when they have kind of random Wells all over the place that’s your delineation development um so you know pretty pretty concentrated area already you likely will end up seeing a bit more uh up in up in this area and then when we look at them the montney South the Northeast BC South a little more companies over here so we have aventive obviously that is drilling absolutely fantastic Wells we have crew energy uh one of the big land holders here that was outside the blueberry River First Nation and then you got shell again uh your LNG participants obviously need acreage if they’re if they want to control their own Supply they’re going to want to expand in this area especially if the LNG Canada Phase 2 comes on uh against FID as well we have kelt as well kind of to the north here so I will discuss more why this is pretty interesting uh as well as uh Spar Delta candles some of the smaller names here’s per million what they bought from lacrada and then silica the remaining locata acreage as well so not as concentrated uh still quite concentrated you can say compared to some of the other conventional fields and other unconventional fields at the same time um you know I I will discuss later on why smaller companies are just not fit for the montney and we’ve seen this in the past where many of them have discovered absolutely prolific acreage and still went bankrupt so it’s it’s more a way of the way the cycle goes and you need this big Behemoth pricing power and production power in order to do anything in the Monte and hey small companies are still having a go at it so all the power to them in a bull cycle can they make it work maybe uh I guess we’ll find out but a lot of a lot of M A here still to be done uh I don’t think some of these companies are are really your full-scale field developing companies they’re more so your explore delineate sell exactly what La crotta did so uh looking forward to this uh happening here um you know over the next little bit let’s look more at the Alberta side so quite a lot of companies a bit bigger acreage as well uh as it as it goes further south so we you see the big names here that we are all familiar with you have your Spartan Delta you have your cnrl you have Arc resources you have uh kelp Pipestone Hammerhead basically all all the big big names uh that were in your montney liquids rich areas so Northeast BC is more gas Alberta is more liquids rich and I’ll discuss I’ll discuss all of this in detail as I go on this is just a kind of Preamble overall map so people have an idea of sort of where we are as we go north here into bus Coupe uh again it just completely gases out so this is more of your liquids Rich Fairway and then you go into more of the gas uh a wet gas if you will a little bit of condensate and then the more Northeast you go it becomes more and more dry gas there so pretty interesting area as you can see a lot of companies smushed in here probably a lot of M A that’s going to happen here in the next 12 to 24 to 36 months um so so this is your gas drills this is your oil drills very similar um kind of acreage positioning because when a company buys acreage they would buy the entire monthly stack as opposed to doing you know something weird with that um keep this in mind again this is a heavily produced area you see the number of Wells here that Arc resources have drilled through their seven gens acquisition you see how there’s open acreage in other companies like Spartan Delta Hammerhead very few Wells drilled so whenever you’re looking at acreage Maps just try and find maps that actually have the latest drills on them and that’ll give you an idea of how much acreage is undeveloped versus how much acreage is developed and the other thing it’s going to tell you is if you see a land area with a lot of Wells on it that’s kind of going to tell you that hey maybe the Tier 1 acreage is starting to dwindle out we can’t say that for sure but companies usually drill their best acreage first and if you see an acreage that’s heavily drilled um you know have a look at the well productivities and what’s happening uh year by year by year um so so yeah so here’s your kind of overall map here you see another area where there’s a lot of drilling has already happened uh this is birch Cliff I believe if I’m not mistaken uh where some of this other area is relatively undrilled especially down here once you get into the cybernet area which is um more of your oil focused modney um has had that relatively low delineation work done so far so here’s your kind of more of a map as to the pipelines so some major pipelines here your your Northeast BC connector you have your Alliance Pipeline that’s going towards your Chicago area uh cgl Coastal Gas link that’s going to connect directly to LNG Canada and uh you know just just look at where these pipelines are do they go through your Investments acreage are they right there or do we have to build pipelines to it how far away from the pipeline is your your investment companies acreage so why is that important because the further away from it you are the higher pressure that’s in the pipeline that you encounter so if you are call it more uh Downstream of where the pipeline begins you’re injecting your gas at a certain point that’s at expression now if you’re further Upstream on the pipeline you now have to beat this pressure to get your gas in the pipeline it’s it’s just simple kind of physics you can flow only from uh high pressure into low pressure your pressure has to be higher to get your gas in the pipeline so the further north the acreage is just given the pipelines the way they are in DC um the higher pressure you’re going to have to inject your gas into the pipeline which has a direct impact on your wells and how much they produce and what sort of compression horsepower you need in order to get your gas in the pipeline this is something that not many people are are as far as I know aware of it was a big problem with Painted Pony um before they got acquired by cnrl was they were always at the end of the line here trying to push their gas into this high pressure system which again impacted the weld results it impacted the number of infrastructure they needed to build so very important it’s going to be even more important on the coastal Gaslight pipeline so look at where the coastal gasoline starts it’s way down south so companies that are you know maybe a bit higher up here um you know some just something to keep in mind it’s not going to make or break companies but it has a it has a direct impact uh especially as pipelines get more filled up because Northeast BC is not really building that much pipeline capacity there is stuff coming online but on the overall it’s still a very seized up system very prone to maintenance issues and and downtime so um yeah uh okay so there’s a question here how much does a compressor Plan cost so each million of gas that you want to go through your compressor so mmcf per day about 150 boes is going to cost you about a million to 1.5 million dollars that’s a rough number to run with you can kind of extrapolate that as you will um uh how much does the pipelines cost uh I don’t really think it matters um right now and I I don’t have that number for you but you can look up the Coastal Gas link what it cost and what the length of it is uh to give you a rough idea for for where we are today uh yeah I don’t have the number on me unfortunately here is more of your geologic map so 94g here is 94g up here 94h 94h so just so you can put the maps side by side you can see how there’s a specific dry gas window right here you can see there’s a wet gas window right here and then you have an oil window kind of more towards the Eastern side um the whole Basin is is at an angle so it’s not really an Eastern side it’s more like of a Northeast uh a Northeastern side is more for oil window once again when you’re looking at your companies what are you trying to buy if you’re trying to buy a dry gas monthly producer look for companies with acreage more towards the Southwest if you’re trying to buy this oily focused Monday look for companies more to the Northeast um so not as much delineation done in the oil window per se but but there’s a lot of work uh still going on there’s a lot of fresh acreage still up here uh celt is doing a lot of work in this area to figure out uh where where sort of the the Basin ends uh as well as tourmaline as well so just keep that in mind which companies you want to invest in and this is why you can’t compare modby as like oh is is X companies Wells better than why companies Wells because one might be in a dry gas window and the other is in an oil window so how can you really compare um those two things um okay so as I continue on I’ll just keep saying this over and over because I know people join the Twitter space late uh if you do want to join for the visuals uh White tundra.ca scroll to the bottom and the zoom link is on there I’ve been informed it’s not working so you will have to put the uh password and the ID in uh manually which is also in that same same kind of paragraph there under events so okay so where are we two different areas we have your Northeast BC very little liquids production you know not much growth but the gas production has gone up significantly it has almost doubled since January of 2017. and this is despite the blueberry River First Nation uh seize up that was happening so producing wild counts are going up you have your gas production going up looks like a pretty good growth Basin and the welds are coming out really strong as I will talk about on the other side we have our Alberta Martini production so once again gas is going up not as fast because the Alberta Martini is more a liquids focused formation and as you can see the the liquids is is much higher but it’s showing relatively flat and the reason for that is just the way that liquids are recorded in Alberta some of them are reported not at the Wellhead level but at the plant level so because they’re reported that way this graph is not really correct in my opinion we we actually have gained a lot of liquids growth in the last few years so once again if you’re on Petra ninja looking at montney Wells in Alberta keep in mind not all of them report condensates at the well level so you might be getting some misinformation if you just look at that uh you almost have to look at the overall sort of uh company what the company is putting out for their liquids and then and then bring it back to the Wells themselves just based on a uh kind of CGR quantity gas ratio or an ogr oil gas ratio so a little bit more information here on the history of the play so you can see here the BC we’ll start with BC and we’ll and then we’ll go to Alberta so you look at non-monthany gas you know we had about 2.5 BCF in 2005 that’s mostly from the horn River from the liarde uh musk wash shales up up like way northern BC that has died off because it’s sour gas it’s very expensive it’s very deep it’s difficult to abandon and a lot of reclamation cost on that um so at the same time we have our we have the montney gas that’s gone from zero BCF in 2008 to about four and a half five BCF in 2022 so definitely things have changed the montney has taken over uh and also the motley share of BC look at that goal it went from zero percent to ninety percent in 15 years and at the same time the montney BC share of the Western Canadian sedimentary Basin gas went from zero to about 30 percent in the same 15-year period um yeah okay so I got another um issue here happening so just give me a sec here uh uh yeah so Dirk I will make you uh the co-host um and then just bear with me here guys um appreciate your help as always Dirk so I’m going to removed a couple guys here uh so once again please put any questions in the chat I I just cannot open the audio because there’s too much security risk of the um uh Zoom being taken over uh okay yeah so Dirk if you can please assist for that I appreciate that um okay so we’ll continue on here so okay just give me a sec Dirk can you remove uh Lester you uh please um uh okay so I appreciate it and Liam as well if you don’t mind um so okay so so when we look at the BC Monty gas um here on the right side you can see how the play has has changed over the years like when they first started these walls were not that good at all and they were very expensive and now where we are um the not only have the wells got cheaper but the productivity has gone almost 5x so you see the 2005 Max you see the 2020 Max um as to where we are so it’s almost five times this is your first year mmcf per day of production uh you see the same here on on this graph right here just just look at the growth here and the reason I like to mention this is because the montney is very early in its development stage so we have lots of untapped Mont acreage undeveloped Monty Monty acreage but there’s about 15 years of History that’s gone into this and uh operators have learned as to um sort of where uh the best drilling methods are the best fracking methods the optimal completions the optimal well lengths uh Etc but at the same time the montney hasn’t been really all that much drill so they have learned all these things they have also learned from the Haynesville the mercellus the Barnett the Permian and we have all this undeveloped acreage that can now be developed at the best economics in a structural bullish cycle and that’s really where Canada has a significant advantage over what’s happened um in the last last kind of few years in the U.S the U.S blew through all their acreage in 1.50 mcf gas they blew through their oil acreage in a 40 to 50 oil environment um where’s the money is still relatively untapped uh kind of for Alberta’s own doing because they never built enough pipeline capacity to get the the Basin drilled properly so uh a blessing in disguise here is also your DC montney gas Wells by 60th month of production so why is this important because we want to see how these Wells tail out so not only is the first year important the fifth year is also important so as you can see significant gains here this adds to your uh expected ultimate recovery of the wells um as kind of the wells go on uh you see okay well five years down the road it’s still making a million of gas per day rather than 0.28 and at the same time we see the horizontal lengths have not really increased all that much again why is that important because that means it’s not like the like the Permian where the wealth costs went through the roof because they they were drilling three mile laterals instead of one my laterals now to get the same kind of oil um BC marketing has always had longer Wells so the wealth costs have not gone up that much at the same time your production is up significantly so very very compelling investment case if you’re somebody who believes in sort of the gas story is that other investors paid for the last 15 years of Discovery the leadership bankruptcies low gas pricing uh figuring out fracking figuring out drilling they already paid for it we come in now at a time when LNG is we can kind of see it on the horizon here um gas demand is going up globally and the acreage has been very well delineated and companies are trading at two to three times cash flow four times cash flow so you know when people ask how can you be a permeable the bear case is really hard to find with these companies they survived the absolute depths of hell for the last 15 years and now you’re telling me that they’re gonna go bankrupt because some random thing is going to happen or a U.S recession is going to take them under not not a very strong case um okay so let me give you a latest update that was still 2020 and uh you know maybe you were feeling a bit bullish here’s here’s 2022. while productivity is up 60 from 2020 to 2022. 60 percent why because better completions Technologies we just know now which completions work uh the the right number of Frac stages and the right kind of rock sand so Northeast BC is an absolutely phenomenal prolific area and it still hasn’t peaked in terms of small productivity not even close so we see here the wells 2021 you know lower but then they have this this shallower decline uh 2022 whatever companies were doing they were over producing the wells so yeah you had a great first year but the decline rates are a little bit higher that’s just the way things go with with more advanced completions Technologies you often will get higher rates up front and then a drop off um sort of as time goes on we see here the average well length didn’t really change it in fact went down last year um and then the the overall production went up despite the number of completions in 2022 going down so this could be both a positive and a negative if you think that there’s enough demand that we could actually consume all this gas and still keep prices High that’s that’s really great for the companies that hold acreage in this area however it leads to the same question our company is going to over drill over capitalize and crash the April price that there is kind of your your red flag scenario when the wells are so good um and there’s so much underworld acreage so just something to keep in mind let’s look at Alberta so montney as you can see relatively smaller on the gas side uh because as you know it’s more liquids focused acreage we see still the motley share of Alberta has gone from about zero in 07 to about 10 in 2016 to almost 25 percent now in 2022 so the mountain share is growing uh as the monthly liquids production grows the gas is just gonna grow with it you see the same on the weld productivity the walls are not as good but the productivity rates are still increasing year year by year not exactly true in the last five years and that’s because once again companies are focused more on liquids now they want these these heavy uh liquids ratio Wells they want condensates they want the ngls so they’re not as focused on the gas which is great for investors who who want more of a liquids component weighting to their companies it’s nice the companies have realized hey let’s focus on the oil positions and we can leave the gas for when it’s actually needed and the prices are much higher um that being said you can see that the overall trend on the 60th month of production is still Rising um I would expect this to Flatline or decrease here given kind of the trend you see here on the uh ip365 rates and this is one area where horizontal lengths have actually continued to go up um just just given that uh for for more liquids Wells the higher longer a Wells end up doing better um especially on tier 1 acreage so probably flat lines here I don’t think it’s going to go up too much more than this but but you know compared to the VC acreage much different and you know again highlighting that we cannot just compare montney as one thing it’s a very diverse basin um so so there’s different companies with different acreages that are that are targeting a different liquids content uh that are targeting different benches in the mod name and running different Drilling and completions techniques this is Alberta and Motley combined so once again just kind of reiterates what I’m saying the modney is becoming a huge play it’s now about 45 of Western Canadian sedimentary based gas and you can see the non-month and gas supply has gone from 16 BCF to about 10 BCF in the last 15 to 16 years so declining that’s your deep Basin that’s your uh liar Basin horn River that’s where other conventional gases whereas the monthly Supply is is kind of a thing that’s keeping it flat to increasing looks very similar to like a conventional oil versus Shale oil a chart that I posted the other day so it’s it’s very similar across across North America where unconventional is taking over from conventionals uh yeah thank you Dirk uh I think we’re uh good to go right now so okay Break Even cost this is where the montney absolutely destroys any U.S acreage it’s not even close so and I’ll and I’ll discuss more as things go on people say the Hainesville is this the Marcellus is that the money is way better than than both of those when you look at the break-even cost of Supply here’s your Western Canadian sedimentary Base in Montana about 50 cents and nmbtu you have a bunch of Permian in here why because the Permian is targeting liquids and so as they get the gas it’s relatively free to kind of produce the cost Supply is just about zero um and then we see our our Haynesville formations come up here there is some montany in here as well um okay uh so so it’s kind of just a a chart that goes through it gives you the different benches and the different tiers um there can you remove Maximilian please um so yeah so so just keep that in mind you have your lowest cost gas here you have your tier one acres in the modney still left whereas some of these U.S acreages you know you’re you’re getting into some of the more um drilled up acreages so okay once again we’re seeing the productivity increase it has been a step change in the last two years an actual step change both in the IP rates and in the cumulative rates so something that I think it’s very important to keep in mind that in Northeast BC the companies that are running reserves of 2020 World results 2021 World results expect to see a big increase in that um are we going to see that in 2022 Reserve reports maybe but it’s it’s definitely a bonus as more investment professionals look at the net asset values you’re gonna get this step change increase in productivity that’s reflected in these as time goes on and also as I mentioned earlier a lot of the acreage is undrilled so the step change productivity increase applies to a massive amount of acreage and if the oil and gas price cooperates you now get this huge gain at a much higher pricing when your break even cost is so low all of that is additional netback you can see where I’m going with this so uh Reserve reports should be out in March or so and we will see what what’s changed I was at one point looking to incorporate uh reserves into my spreadsheets it it is still um kind of coming but I I just found it very difficult to to quantify Reserve values at different WTI and Eco pricings so gonna be one of my goals in 2023 amongst other things as well so Alberta productivity this is more of a gas so you see pipes on Wapiti going up you see Glacier boost Coupe really Rising uh Southeast and other modney so you’re talking about your simonet areas looking good catwa declining so the cap was seven gen’s acreage is the most drilled up acreage in the montney so far so it’s going to give us a good call it three to five year upfront information on what’s going to happen with the rest of the montney when they get to a certain amount of Wells drilled on the acreage the cap is by far the most thrilled area why it is an absolutely phenomenal acreage seven gens grew from zero to two hundred thousand boes per day in a span of five to six years it is that prolific and and remember that was in a 60 WTI and three dollar gas sub three dollar gas environment um and they still made money so um you know but I will talk about catwa more a little bit later on because what’s happening in katwa is very similar to my concerns but the Permian and the Shale productivity in that area now when we look at oil productivity relatively flat so the Wembley car area is looking good which is just North of Grand Prairie uh your your gordondale area the progress anyway anti-creek summon it uh all sort of flat-ish um at the moment so um okay so um yeah and that and that excludes plant concentrated energy else once again it’s unfortunate because it makes a huge difference in how we look at these Wells and I just wish the Alberta system would get better at reallocating that back to the Wellhead level here’s your British Columbia monthly Supply stack what it tells you is what is the break-even causes apply for how much resource there is a 100 TCF of resource that’s good down to 10 cents 10 cents nmcf so we take that we say there is about 375 TCF that’s good to a dollar fifty 325 PCF I should say and uh to give you sort of to put that in context if you’re producing call it 10 BCF per day yeah call it 10 BCF per day you’re producing about four TCF per year so so Alberta and BC produced about 16 BCF per day if we started producing 10 from the montney in two or three years that’s about four TCF a year there is 325 TCF that’s good down to a dollar fifty that is a scale of this resource and why Canada has completely shot themselves in the foot by continually delaying LNG projects by continually adding restrictions and uh other unreasonable requirements uh compared to what the US has done uh and our really profit profiteering from Shipping LNG exports uh to the Europe and making royalties taxes income taxes shipping um all sorts of economic benefits from doing this um so so I look forward to LNG Canada one coming online and and really some of the other other ones as well uh including Cedar um uh as well so um and the other one which whose name I’m forgetting right now um I apologize QE uh so so anyway a very low cost um Basin very very competitive on a global scale very environmentally friendly and uh I think the lowest greenhouse gas emissions uh for natural gas production uh in North America for sure a little bit more of the history we’ll go back all the way to 2001 you see how the whales were so bad now they’re significantly better this only goes to 2017. we are now at about seven uh seven mcf per day so even much higher so I love I love acreages like this where somebody else spent 15 years 20 years delineating something I get to come in right now and buy companies at three to four times cash flow great I’ll I’ll take those deals all day long um you know they suffer through bankruptcies they suffered through 15 years of not making any money uh opportunity cost Etc I’ll come in and gladly buy them that’s exactly why I think there’s going to be a lot of M A in the space because companies will eventually realize like hey let’s just pay a little bit extra and take over this 40 60 100 Year reserve and just get on with it uh frock stages again we had about 30 frock stages in 2016. we are now at about 100 plus sometimes 200 plus Frac stages you can see how things have gone up uh as as time has gone on the research process if you will as time goes on and why I will once again repeat Rome wasn’t built in a day and oil companies are not built in six months these are decade-long processes that we have the opportunity to enter um not investment advice this is my own interpretation of of the situation we are in and I get to buy these companies uh with relatively lower risk as far as geology is concerned into a what I feel is a bullish oil and gas cycle as everybody knows um a little bit more on the pipelines as you see gas is a big deal in Shale plays why because if you can’t get rid of your gas you can’t produce your oil it’s just the way it goes so you’re not going to be allowed to flare you’re not gonna be allowed to vent gas you have to produce it and put it into a pipeline we see West Coast Energy going into Washington State we see the T North uh montany T North Nova gas and then your alliance again going to Chicago there is a bit of extra capacity coming online in the ngtl the Nova gas lines but as you see your your alliance is relatively maxed out and then as well your West Coast pipeline is is relatively maxed out uh tourmaline being a company taking advantage of this to ship gas into California make 10 15 20 mmbtu uh ngtl not not all damage growth uh your Coastal Gas link is your main feeder line in the next call at two years that’s going to kick on uh at about 2 BC up per day of incremental export out of the basin so keep this in mind if you’re a growth company if you’re investing in growth companies make sure they have firm Transportation capacity so you don’t want them to be you know going about um here and they’re growing production and then oh we can’t even produce this gas because we don’t have the pipeline space you don’t want to end up in that situation trust me there are companies that have got slapped doing this um not understanding where the base and Supply demand is not understanding where the firm transportation is and not willing to pay the price up front to lock in firm rather going on this floating thing um can you make more money doing it possibly very risky when the export capacity is this tight a better map overall map you see Coastal Gas link you see T South T North your ngtl system and the alliance going to uh Chicago and then more of your kind of Alberta focused pipelines your Empress lines um and the Foothills lines that go through the Deep Basin and then take gas to the east coast and into the US Chicago Dawn um those big hubs out east which is where the population is so therefore a lot of the pipelines will end up going to where the population is where the consumption is um pretty good planning in that way uh wood fiber that’s the other LNG yeah wood fiber um okay let’s get into the technical engineering details a bit so I will just repeat anybody that wants to join for the zoom session uh White tundra.ca scroll to the bottom under events uh and zoom link is in there the link exactly is not working but you can copy paste the ID and the password and you can get in there so where is the modeling the Monty is about 6 500 to 11 000 feet deep so call it two to thirty five hundred meters two thousand to thirty five hundred meters deep quite a deep formation uh the thickness is really good uh the net thickness in some cases 500 feet the uh thermal maturity I’m not exactly sure what this is uh but we can see how it compares to the Marcellus the Haynesville and the Barnett the three Big Basins in the US and this is really the important ones permeability around 350 Nano Darcy permeability this graph down here compares the permeability of different formations and what this means permeability means how many cracks in the Rock are there that allow oil and gas to naturally flow within the rock so so if you drill into the Rock you create a low pressure Zone is the oil and gas can naturally flow we see our areas like the Sparky and Southeast Saskatchewan very high natural permeability which means you don’t need to frac just drill a well and it all flows easy peasy in the case of gas shells or oil shales the model is not a true Shale and I’ll talk about this later on but in the case of gas and oil Shields the permeability is about 350 Nano Darcy all the way down here to visualize this think about your granite countertops that is exactly the permeability of Israel so the the goal that you’re trying to do is let’s say there’s a big layer of oil just underneath your granite countertop you now have to force it through the granite and on the top side can you do it well you can you know you can be the biggest bodybuilder in the world you will not be able to put enough Force into that that liquid from underneath to push it through the granite and on top and therein comes a problem that’s why this oil and gas has been trapped for decades decades because nobody could figure it out how are we going to get this out so what they did they fractured the granite using high pressure water and just like put really high pressure in the small area closed it off and then put so much pressure on this water that it literally fractured the granite awesome now the oil can flow through you don’t have to put all that much pressure on you may not even have to put any pressure it will naturally flow up so um so that that kind of gives you a visualization of how it is whereas if you want to think about the more of the conventional uh reservoirs it’s like a layer of sand so instead of granite think about a layer of sand you now have oil underneath this and you’re trying to push it through the sand it wouldn’t take that much pressure to push it up and and have it show up on the other side um it’s pretty obvious because this is the way that oceans work they literally carve through the sand and go into and above the sand so uh gives you a bit of a understanding of that the the porosity number about two to four and a half percent um it varies across it varies it can be from one to five to six seven percent uh in some cases but that’s that’s roughly where you are you see the Haynesville has a bit higher porosity um and you take all these factors into consideration and you end up with a gas in place how much gas is in place per section section meaning one mile by one mile one square mile of land you have about 200 BCF of gas perception um and and I think the montney is 50 000 square miles if I’m not mistaken so so think about that 200 BCF of gas per square mile and there’s 50 000 square miles of that Canada produces roughly 16 BCF per day 16 to 18 BCF per day so each section gives you 10 days there’s 50 000 of them you have 500 000 days worth of resource uh in here not not all of it can be produced obviously but gas recovery factors are are relatively High uh for the most part you’ll be pressure gradient which tells you as you go from surface as you go deep how much pressure does increase how much does the pressure increase 0.65 PSI per foot pounds per square inch per foot um yeah so roughly the same in in you know throughout throughout the world really it’s all the same and then you get your EUR for well on top of that so that’s a bit on the geologic side of what’s Happening Here um you know give you an understanding why Shale is so hard why people couldn’t figure it out until now um and and kind of where we are and also why the Shale um is it’s just so expensive because you have to do these completion techniques that you don’t have to do in the conventional side okay so a little bit more on the gas the Monty gas here is your Marcellus it grew from 0 to 25 BCF in a decade over capitalized here’s your Haynesville it grew from 0 to 15 bcfs in 12 years relatively over capitalized what happens to these gas formations in the U.S because they have a heavier decline rate this is what happens to them when you over capitalize these formations you get this very small Peak and then they fall off it’s a very small Peak and then they fall off in less than decade you’re producing a third of your Peak and you’re barely able to sustain that the montney because it’s export limited will never have this sort of growth scenario you just can’t you would have to build another 10 20 BCF of export pipeline knowing the Canadian government and the pace of development there or infrastructure not going to happen so this allows the Monty to have a more of a normalized if you just follow my follow my mouse here a very long normalized Reserve 40 50 60 year Reserve and inherent benefit to investors because not only do you get a really nice Reserve Life you also are not spending all your cash flow into the ground to get this like on unsustainable growth phase that then peeks out and dies so once again here’s your U.S basins looks very similar to the Permian here’s what happens so um you know kind of two points there you the money producers are much better set up for growing productive sustainably you as an investor are not are not going to be exposed to like this egregious pace of development um and also as the U.S basins possibly decline into this these bigger basins there’s a natural Gap to fail not right now I’m talking three four five years down the road at the same time if LNG comes online double whammy bang North American Natural Gas could become very profitable despite the fact that we have a metric like Global uh a whole planetary ton of it uh that’s in the ground so um keep this in mind Canada is going to be a very strategic North American Gas producer in four to five years if somebody has a long enough investment time frame and uh you’re looking to get into companies for like a the way people used to invest for these multi-decade uh investment sort of scenarios and then they say you know apple and all this they say oh yeah I made a thousand X on Apple well you bought it early enough you you saw what was coming and you just sat on it so very compelling even from a longer term um investment scenario um yeah again this is not investment advice this is I’m sharing my opinion the reason that I enter some of these names and and my own sort of investment thesis around this especially because I invest on more of a longer term uh basis as opposed to a three or six month hold um a bit like ESG having some external breaks applied yeah yeah it’s a bit like ESG yeah ESG has has really been the reason um why a lot of infrastructure has not been developed and it’s why the Canadian basins cannot expand production uh the same way so um you can see how conventional gas and oil were the big deal in in the 2000s now you see how the Monte just took over absolutely just took over um without without anything slowing it down until it hit sort of its export capacity constraints which is where we are today uh what when we look at the reserves we don’t have that much booked reserves in these basins so when I say there’s five to six hundred PCF of recoverable resource maybe 10 maybe five percent is actually shows up in reserved reports once again once once investors believe that we are in an energy scarcity environment people start looking at not cash flows but net asset values and if a company’s net asset value as they drill more as they keep adding to reserves as the net asset value keeps going up makes for a very compelling sort of case okay so we’ll get into some of the company stuff here this is crew energy and I’ve discussed this chart before um so multiple benches in the montney it’s not just one zone there are multiple zones within the upper Martini there are multiple zones but in the lower montany and there are some zones in the middle of Montana as well very less but but they are still there So within the upper month you have an AAA ABC all different zones with their own productivity you can literally stack Wells what we call the cube development um so so montany stock well right on top of each other and they’re all productive as long as you can make sure the fracs are not interfering with each other and look at look at the geology a little bit more here so the upper montany kind of is bigger and then it becomes smaller whereas the lower montney is smaller and then it gets bigger as you go east so this is going from west to east from manias to Tower uh tower being the most eastern acreage that crew has so um the lower mounting has relatively been not targeted uh all that much so as companies go into this as they delineate this even more reserves to add even more drilling locations to add fantastic this is the same thing in more of a 3D format so you can see you have your upper Target middle Target and lower Target because the montney is a 500 meter thick acreage you can plant multiple Wells on top of each other the distance between uh the top well and the and the next bottom well is kind of what you need to make sure so that there’s no uh fracture communication and then this is called your weld spacing so the spacing between the Wells on a horizontal basis is called your weld spacing companies will run different kinds of weld spacings either to maximize your per weld recovery or to maximize the number of uh the amount of oil and gas you get out of an individual section so what does it mean look at your company’s wealth spacings and what they’re doing especially if they’re changing them around year to year so companies with less acreage will usually have tighter well spacings because they want to maximize the amount of oil and gas to recover out of their little box whereas companies with huge acreage will have wider well spacing which allows each well to produce way more oil but because each well produces way more oil they have a lot of less Wells per box so they end up recovering less oil and gas on that box they can always go back and infill drill a reef rock um do a cleanup job Etc but all of that costs money and if your well is going to be drilling in the middle of two other Wells its productivity is not going to be as good so that’s something that’s going to be well down the road it’s something that the Permian is suffering from again I will discuss more of this next week so here’s your gamma here’s your porosity you can see how the prostate signature is really nice um and in the gamma signature um kind of cuts off down here which is your Shale so the further to the left that the gamma signature is you’ve hit kind of a very tight Shale formation and that’s what’s kind of underneath the modney here um and on top as well that’s what keeps your oil and gas within a certain confined box uh if you will um okay so I don’t I don’t have much information on the horn River Basin unfortunately but it was a big big Basin it might still see some development as uh gas prices go higher but it is a very deep expensive acreage to operate it is a lot of sour gas and companies just don’t want to deal with with that sort of thing um at just at this time the horned River was was really drilled in call it early 2000s when gas prices were eight ten twelve fifteen dollars and nmcf so we have a long ways to go before those kinds of acreages become important again just because the money has so much Supply if gas in Alberta got to six seven eight ten bucks they would just start drilling like everything out of the montney and start building Pipelines of course there’s a lag effect on that which could be multiple years but the horned River Basin has the same leg effect like there’s only so much pipeline um to go through so uh here’s a bit more about the uh what we were calling the cube development so you see how the wells are the the well right on top of the the other well is never like uh parallelly on the same uh is never parallel the same it’s it’s kind of like this wine rack method just to prevent fracture communication so this is another thing that they’ve learned over the years uh you can see how we have the upper middle Mountaineer and then the lower Monty as well on top of that and you can see how many Wells they’re they’re putting in here so um you know it’s it’s one square mile this way which is about 1500 meters 1600 meters and usually companies will run about a 200 meter well spacing so you can get up to six to eight wells in the same section um parallelly and then you can do up to five to six benches depending on how aggressive you want to get um nobody has made the full cube development really work uh and cannot tried it and they failed horrendously um so so there’s a limit as to how many Wells you can start piling in um because the wild productivity does drop and and there is a risk of communication anytime you Frack something the fracture could go any which way and there could be natural fractures in the Rock there could be other uh Shale zones in the rock that make the fracture Go a different way than what you would have thought so not recommended to drill this 64 well pattern um but again I don’t I don’t make those decisions so it’s not up to me here’s a little bit more geologically what’s happening so as I mentioned the upper montany more towards the uh West is bigger and then the lower model is smaller as you go more into the Alberta side your your upper monthly completely disappears and you get this lower montney that is much shallower easier for drill and the lower modney has a higher liquids content so that’s why we draw the lore modney in Alberta your Charlie lake is a formation that gets completely squished out so to make up for this change in the montney it’s your Charlie Lake that gets like totally gone and then you have your kind of your Shale Zone on top and your shell Zone on bottom as the um I don’t exactly know what what the term for this is but but as you move from the Triassic um era to the Jurassic era um yeah so Cruise acreage is actually right on the coastal gasoline pipeline um as well as other major pipelines so there’s there’s kind of a reason that um they have a very very highly regarded acreage package it’s also I mean it’s also outside the blueberry River First Nation um area so so there’s kind of a natural benefit from that wise fraud communication a problem so it’s a problem because let’s say you have a a while making 100 barrels per day and you Frack near it and um you now have communicated the frocks oil and gas will always flow to a lower pressure zone so the well that are the wells that are already producing are going to be a lower pressure zone so your new well instead of producing at Max rates is now going to start leaking oil and gas into the older well which may not have the pressure to get the all that liquids up so now you got to install a gas lift and your new well might become a complete dud because everything just starts flowing into the lower pressure zone so uh you don’t want front communication um no matter what when we used to produce uh when I used to operate wells in the Grand Prix area and there was a Frac happening nearby all my Wells in the area would get shut in because there if the front communicated your well could suddenly go from making like 10 decks of gas E3 and 3 to hundreds of decks of gas and immediately pressure It Up In some cases pressured up to the point that your separator explodes or there’s some major equipment damage um I’ve even seen cases where the entire tubing strings can come out of the well because so much pressure got communicated maybe like a monthly frock communicated with a different Zone uh uh well and the setup for the well was not such that um uh that it could handle it and I wish I could share the video but um I don’t know if I have it anymore but but there’s this video in I won’t name the operator uh in the Grand Prairie area about two years ago yeah about about two-ish years ago um where the entire tubing string got launched out of the well so think about 3000 meters of heavy Steel five inch um diameter pipe um shooting out of the well yeah not not good um you don’t want this these things to be happening so okay uh let’s talk a little bit more about the geology so we have the upper Monty is a silly clastic reservoirs uh silicy classic Reservoir and the middle and lower montany is a bioclastic reservoir clastic just means broken pieces so take any rock that you see somewhere smash it up and you end up with a clastic environment so how does it happen it happens because of weathering it happens because of glaciers coming in crushing the rock it happens because of waves and tides that come in and continually beat on cliffs and they destroy them into little pieces and the pieces go and they fall somewhere then uh okay so so then what happens in the bioclastic reservoirs you have plants and then animals that burrow in between these uh call it sand or silt or rocks whatever uh mud they just they just burrow in there they die that over millions of years becomes your oil and your gas that’s as simple as it is in the silicey classic reservoirs it is more of a silt Stone so it’s not this fine-grained sand it’s more of a a small corpse like a very small corpse and the the oil and gas in that is is not from a from a bio like dead plants um yeah I’m actually sure not not exactly where the oil and gas in in Celsius uh reservoirs form but um still working on my geology work uh but but either way that’s that’s kind of the difference that’s why the um middle and lower monotony are more liquids because it’s literally Dead uh algae and plants and animals which more so become liquids whereas the upper montany is is a lot of gas focused um development drilling there is still condensates here don’t get me wrong but but it’s more uh gas focused uh Reservoir especially in the Northeast BC part of things so um yeah that’s that’s a bit more here’s a beloy Zone which is kind of your your lower Shale uh as well currently sitting at a scene around for oxide Leland area uh I don’t know where Leland is unfortunately but if you give me the LSD I can tell you right now uh if it’s Monty or not um okay so a bit more here so uh just to get into the geology a bit you can see more about the lower montney uh silt stones and the the bio a classic environment and then the upper ones uh are your other silt stones I’m not going to go into this because I don’t understand this what these words mean but all I’m trying to say is that these are very well delineated areas this is not something some guy just came in and started producing the this is multiple Decades of geologic um mapping uh well logging about uh Reservoir parameters about oil and gas uh parameters and lab testing so so there’s a lot there’s a lot of things that we know already and um you know once again as I showed here just because you create a lot well in one area doesn’t mean it’s the same elsewhere so there’s always like a you always have to have Well Control in your area but you can generally map out the reservoirs based on extrapolation so if you have a well here and you have a well here and you can map those out you can extrapolate what’s in the middle for the most part and you can kind of see this is a relatively large area that they’ve mapped out here um from all the way Western uh uh or sorry Eastern BC to Western Alberta okay so people uh didn’t believe in the montney so this is 2014. the Monty Basin hottest play in North America or just a lot of hype uh spawning a new bubble it said in 2014. uh and and here we go the LNG industry was already on top of Mind in 2014. we still don’t have an LNG facility built in Canada embarrassing so now that we’re close a lot of this optimism that was in 2014 is finally getting uh realized if you will here we go here’s another comment from the same article almost every gassy operator has a slide in the presentation that nodes they’re very close to LNG this was the reason some of these companies were selling for absolutely huge premiums because they were waiting for LNG what happened uh nothing really happened they couldn’t get the LNG terminal built they couldn’t get the coastal gasoline built companies started leaving they started selling their acreage and now we’re back in the same exact time frame where we’re two to three to four years from major LNG projects uh not just one multiple of them uh coming online so um again I won’t beat a dead horse so what happened uh during that time Progress Energy whose uh acreage got shared earlier how to make a counter offer to buy Patrol or no Patronus had to make a counter offer to buy Progress Energy for 5.1 billion dollars there’s been some major M A that has already happened in this area then there was this loud phase because oil and gas prices dropped LNG never got built and now we’re coming back into the 2014 euphoria not not quite there yet not even close but it’s going to get there uh as long as oil and gas commodity prices cooperate and you have a strong view sort of on the macro and where things are going um here’s one that’s was very interesting to me a quote that says the hype over these Junior Canadian monthly stocks is unbelievable it’s not going to end well it did not end well uh because uh like this this code was referring to the Seven Generations IPO which was about late 2014 18 a share is what it happened at and um as you know seven gen sold to Arc resources and the value of that that share of seven gen switching to Arc is today about 18.50 a share so in nine years eight and a half years the IPO investors made zero nothing um they never got dividends they like they they never really got anything for the company growing to the scale that it did um so so it didn’t end well a lot of junior junior monthly companies went bankrupt many of them sequence Delphi even some of the older ones that that I’m not aware of uh at this time and now I get to buy these acreages fully delineated XYZ so um I want I won’t talk about that too much so here’s what’s happened in the last two years so cnrl has bought Painted Pony an absolute steel um ARP and seven gens had merged conical Phillips bought out kelt after kelp built out a gas plant uh really good delineated acreage liquids Rich uh tourmaline has been very active they bought a piece of painted pony they bought Black Swan Polar Star said URL and Chinook Chinook and other company that uh delineated awesome acreage and then just got burnt by being so small same with all these cellular Polar Star black swans same exact story they couldn’t make it in a two dollar Eco environment um despite their phenomenal acreage so this is kind of what’s Happening um a lot a lot of M A so far more more still to come um you can see that there’s this this company specifically Kalama has a land package way up here and that’s why when I was talking about make sure you’re not at the end of the pipeline some companies are at the end of the pipeline and are going to suffer um from that so um so there’s a question here as basins become well characterized has corporate Advantage um move from technical expertise to production yeah for sure for sure like the technical expertise is for the most part done at this point now it’s about who can produce the best who can get the best uh export routes for their gas who can get the best deals on Drilling and completions who can get their paths built who can have contracts with the First Nations built so they can actually develop their properties uh who can make a creative Acquisitions yes it’s becoming more of a corporate development game as opposed to a true engineering geology game which is now in the past um for the most part they’re still going to be continual uh increases but but that’s for the most part this is what the Acres looks like so when I say the monthly is not good for small companies small companies can’t afford to clear-cut forests way in the bush and then run hilo’s day in day out airlift drilling rig equipment in build their own roads like this is this is Big Boy territory so just keep that in mind when when you’re investing in these there are going to be junior Monte names that pop up inevitable every cycle somebody thinks they can go and take a run at at some acreage way up North somewhere and uh they’re gonna build their own sites and you know they can make it work in 100 oil environment hey kudos to you we we need more exploration people like that um but the investors are not not the the table is not skewed toward the investor there’s a lot of money that doesn’t go into Drilling and completions that has to go in before you get any sort of property set up way in the bush um yeah and all these costs are going up because there is huge cost inflation for for these sorts of services um there’s just not many of them left and the ones that are left are already spoken for um so yeah another picture this is the bush litter these are your you know some sort of either a really well not a drill but looks like a frock going on here and these are your water ponds I’ll talk about these water ponds later but any company that has excess frock water Pond capacity is uh doing pretty well any company that has excess Reservoir capacity as in they can pull fresh water from reservoirs is going to do quite well um as Northeast BC is developed so again intangible stuff it doesn’t make or break companies but it makes a difference so their operating costs their infrastructure cost their processing cost Transportation they’re Drilling and completion costs all of these things add up when you’re growing a company from 20 000 to 60 000 boas per day all these things add up pretty majorly and again I’m not talking on a one well or a six month cycle I’m talking over a three to five year development uh full-scale field development cycle here’s another picture of uh kind of the monthly gas plants so they are built in this modular fashion so all the piping will be in one line and then you build modules around it as the gas plant capacity gets bigger very efficient very effective like amazing planning that goes into this you see here the pipelines are coming out of the ground yep coming out of the ground right right there there’s one they come in they go into your Inlet separator right here in the inlet separator you you take out condensate water oil whatever whatever it wants crop out you then take it into a d High unit which will take out other waters and um any sort of other contaminants in the uh in the unit then you put it into refrige and uh what the refrigerate will do is drop out ngls it will drop out propane butane you can adjust the pressures and the temperatures in a refridge uh depending on um I am recording right yeah uh okay great um the the refrigerated can be can be uh changed depending on temperatures and pressures if you want to pull out more propane you see oh like propane price is looking really good you can adjust those things on the Fly and get more ngls or less ngls so you might have heard your gas company saying we re-injected ngls into the gas stream and all this that’s what they’re trying to say is that propane to butanes weren’t worth enough so we just we just left the research plan go and we just left the propane and boot a butane in the and uh in the gas frame and so the gas frame at a higher um heat content that being said some pipelines will not allow you to do these sorts of things so you have to have certain parameters on the pipeline and what happens after the refrig you then compress the gas so you you take it from a low pressure you get it to a high enough pressure to put it into the pipeline sometimes it could be up to 7 8 10 15 MPA Mega pascals uh so you need a lot of compression horsepower sometimes it’ll be multiple stages of compression so you have your initial compression and then your secondary compression uh sometimes even a Turf Fury compression we also have amine sweetening so if you have sour gas it has to run through amine sweetening skin where it pulls the H2S hydrogen sulfide outside of the gas frame and then you can sell your gas based on again the pipeline parameters some pipelines will not allow sour gas some will not allow a certain kind of water content or NGL content and then you have a condensate stabilization so the condensate that gets pulled out is very gassy so the the the gas is oily uh very volatile and the oil is gassy so you have a specific quantity stabilizer where you leave the condensate you let the gas flash off and you put it back into your your gas stream and then your oil slash condensate goes into your oil tanks here is what a propane bullet looks like here’s what an oil tank looks like so all the black tanks are oil the water tanks will usually be blue but they can also be black or white and and this is your propane bullet so they keep propane at a very high pressure in these bullets and um you might have seen driving down the road those propane trucks that come in they will take this propane uh in its pressurized State and [Music] um uh and sell it sell it or or take it to wherever it needs to go so um very nice you know I I love checking out new gas plants when they’re freshly built um have went to many of them just for my own curiosity and uh just just cool to walk around and see state-of-the-art Equipment Technology automation uh ESG emissions reduction a lot a lot of cool stuff um yes yeah dirty up yes a refrigue is basically a crude crude fractionation I’m I’m not going to pretend to be a Refinery or gas plant expert by any means so this is just my understanding of it but yes the the refrig plans when you go in there there there’s literally like icicles and a snow like that that liquid is no everywhere because that’s just that the temperatures at which these things operate um it’s quite it’s quite cool to see um you know especially as an engineer it’s just awesome uh the kind of things that are out there um yeah here’s a frock going on looks like a Monty frock so you have uh I think this is calproc given the green color on this Coil Tubing unit and all these Pumpers will pump down uh water uh they’ll keep pumping water down and keep fracking the formation at a very high pressure and you can see the number of individuals it takes to run oil and gas operations when we say there’s a labor tightness it’s not one or two guys that are going to come in and solve the labor tightness issue each frock needs 50 7 500 people each drilling rig needs 200 direct and indirect people so there’s a big group of people that makes this happen um you know working out there 24 these are 24 7 365. there is no vacations there’s no birthdays there’s no Christmas you you work when you’re called into work and um that’s that’s just the way the oil industry works we consume oil 24 7 365 we need to produce oil 24 7 365. foreign picture nice promotional uh pick here nice little uh plant site a little flare stack here on the end and um awesome awesome territory awesome like it was absolutely a great working in these types of areas lots of wildlife as I discussed in my uh a video um the video that I posted the Wapiti uh a run video on the ATV um if you haven’t checked that out I I basically have a had a GoPro on my side by side when I used to operate and I posted about a hour-long video on my YouTube where I just talk about the different things as the video goes on um the screen record didn’t work properly for that but um you know you still get the point as to as to what’s happening um these are called right-of-ways so this is where the the pipeline is buried and most of the time they’ll keep this very clean and clear-cut because if there’s ever a spill in the pipeline you need very fast access to go and check it out you can also run electrical cables um depending on what exactly you’re trying to run you can run Wi-Fi and satellite uh what we call it fiber optics are through here and most of the times just pipelines so there’ll be gas pipeline oil pipeline there could be a fuel gas that’s coming in to feed the site uh but yeah these are called right aways there’s a road coming in and going out east all right yeah East on the picture I I don’t know where exactly this is um okay so before we get into the company specific stuff um I just wanted to say again for anybody on the Twitter that would like to join for the zoom visuals uh whitecondra dot CA scroll to the bottom under events and the zoom link is there you will have to input the ID and password manually right now there’s something wrong that I will fix uh for the next session okay so let’s compare the US and and Canada so we have the you know let’s give the oil oil producers yeah not a good comparison we will go um actually let’s let’s keep the automated producer so about fifteen thousand dollars U.S capital efficiency which means for every barrel they bring online they are paying about 15 000 U.S um to bring that Boe online um on the on the gas weighted side you have somewhere about around seven thousand gas just comes on a lot stronger uh keep in mind that the Boe of gas is worth a lot less than a Boe of oil so naturally we expect this to be lower um the the Canadian monthly producers are on a Canadian dollar basis about 13 000 so so quite quite attractive especially the liquids Rich Motley producers they really compete uh with these Permian Eagle for names and then on the gas Focus side you know tourmaline is your big one uh Birch Cliff a little bit expensive uh because they’re they’re dcet costs are a little bit higher um but but you know tourmaline doing really well comparing to eqt uh kotera and Antero uh really well the the kind of the number to watch is this one here because the um some of the US names have have a little bit of higher decline rate uh you can see they’re spending more of their maintenance Capital uh more of their cash flow on maintenance Capital versus something like a tourmaline so when we compare the Blue Chips uh the Canadian producers definitely have an advantage in terms of their decline rates and the clear quality of their acreage uh let’s say on the oil side relatively similar um and the reason for that is that the Permian is about 90 oil on their Shale the montney oil is about 35 to 40 at Max liquids so naturally um this is a more high value product uh that they’re getting in the U.S that’s that’s their definite advantage that’s why the Permian got to 5 million barrels of oil production in seven or eight years that’s that’s literally the reason is because they found a Shale that’s 90 oil instead of 40 I call it 40 max uh oil so um interesting comparisons I’m not sure how much you can read into this but you can kind of see the um change over the years you can kind of compare between the two I don’t really want to make any strong statements based on this data this data because there’s way way more other stuff that should be taken into account as well Okay so oil place and natural gas plays half cycle payout period half cycle means we only look at the drilling completion equipment and time cost full cycle means we look at the company’s GNA we’ll look at their interest cost we’ll look at what it costs them to buy the acreage Etc so on a strictly half cycle period after the clear water it’s all money the montney is very very prolific very economic the well costs are way cheaper than the Permian um and the Haynesville and the Marcellus especially in Canadian dollars versus US dollars today we see that that some of the Permian Delaware stock doesn’t kick in until way down the list here um and we’re talking tier one stuff uh it doesn’t kick into to way down here I’m gonna explain this in my usual update next week why why the Canadian acreages are gonna make way more money not just because the oil cycle is better but also because they just are better producers have better decline rates and are much cheaper and and I I don’t want to get into this but I’ll I’ll talk about this next week so let’s look at a half cycle payout period okay one times payout what does it cost to recover our dcet cost at fifty dollars a barrel U.S WTI 2.50 mcf Natural Gas the Canadian plays are at 1.5 years it highlights their very low Breakeven Supply costs the U.S Trail gas plays are greater than six it’s that much different on the lower end of pricing when we talk about a hundred dollars Barrel oil and 5.50 gas U.S the Canadian ones are 0.6 so 0.6 years for payout have cycle payout the gas plates are at one so what we can conclude is that the gas place in the U.S are much more torquey to higher gas pricing so when gas price in the US can hit seven eight nine bucks as it did just a few months ago the the U.S Shell Gas plays are making a lot of money way more torque on the U.S gas place but they don’t have the downside protection not even close once prices go like below um call it four dollars in mcf gas then you actually a place really suffer but let’s let’s spice it up a bit um two times half cycle payout so when do they recover their costs not just once but twice so if it costs you to dcet cost was 10 million effectively what it’s saying is when do you make 20 million of netback because the Canadian gas place have lower decline rates when we look at a 75 dollar per barrel four dollar mcf gas environment about 2.8 years median the U.S is 7.5 so they pay out once but because they’ve declined so much by that point the second payout is just a three times as much longer and even in a bullish environment this holds true at 100 uh a US Barrel WTI at 5.50 gas U.S 1.8 for the monthly or for the Canadian natural gas place this is not just Monty I should say this is the Canadian natural gas place everything is broken down for anyone that’s going to be watching the recording you can you can play around with this um cut up on your own so 1.8 years two times half cycle payout at the bullish scenario um 100 WTI 5.50 gas the U.S Trail plays of 3.9 the U.S shell plays don’t make money they really don’t make money after they pay out the the Permian is very similar to the Marcellus and Haynesville in terms of how much money did these producers actually made as they grew 200 BCF per day not much the montney as it grows I mean the numbers speak for themselves I don’t I don’t need to um keep saying the same thing uh over and over this is what we want this is Delphi energy that went bankrupt or they got bought out uh can’t exactly remember right now if anybody knows people at these modern day producers as an investor this is what I want every single well what’s the length what’s the ip30 how many fracs ip60 or ip90 RP 180 RPG 70 rp365 and then ip730 if it if you know somebody at a monthly producer if you have a state in a monthly producer if you know somebody at IR send them this this chart and say this needs to be in your corporate presentation if you want your multiples to agree if you want people to really know what your wells are doing we need this for every single well in your corporate presentation or as an addendum um sort of file because this is what investors are looking for when they are in the montney there’s so many different areas there is so many different um uh different kinds of like gas oil ratios condensate oil ratios it really simplifies things especially the technically focused investors they really want to know what is going on within your wells you can see how the montney some wells are really bad some wells are really good and then you have these all these walls that are sort of the median average Wells um as well and I believe Paramount is the only one that puts this right now in their corporate presentations uh we want more of this so if you’re listening and you’re you work at a monthly producer please make this happen this will help investors uh this will help you get more Capital into your your companies it really transparently clarifies things the one thing I would add if you could is the cost the well cost per will put the well cost in let us run our own netbacks let me run my own type curve you know give me a chance to run my own uh you know FCF calculation give me a chance to run my own production uh estimate on on what’s going to happen why are you doing it um you know I’m just I’m just throwing a graph on there which may or may not be correct it may be misleading people don’t believe you you know throw this in there and I really want to stress this point because people keep asking me when when are companies going to re-rate how come the multiples hasn’t expanded it’s because people don’t feel comfortable investing in in oil and gas companies they need more transparency they need to know what’s happening and a large part of my efforts are are towards that goal and it would be good if the company is going to support me on that by just posting transparent data all this data is already on petronasia I can already make it you know but not all investors have those um you don’t have the time they don’t have the softwares they don’t have the interest to do these things um yeah no thank you Derek uh the initial production rate measures how many how much the production was for those rate for those days so the ib-30 is the first 30 days the ip365 is the first year effectively yeah here’s some of the growth in the montney you can see acreage Hammerhead you can see the analog Wells that are being drilled around in this is calc War right here you can see how Hammerhead is developing their acreage most companies will develop where the pipelines and infrastructure is the full-scale development and then they’ll have these delineation Wells all across all across their acreage um so yeah um I just want to show you the the scale of how much we have developed you see areas that are over developed you see areas that are underdeveloped most of the asset is underdeveloped just like this Okay so actually the US gas charts earlier up two to three years Peak down this is how the monthly producers are planning their production 30 plus years of production at the peak is it going to happen we don’t exactly know yet because we’re still trying to see how how much the degradation is in kagwa and what the overall base and quality is to some extent but yeah this is doable they can either produce 30 years at 60 000 boes or they can produce 10 years at 200 000 boes right like that is a difference in the company’s mindset in Canada it’s the difference in the company’s mindset overall in the oil and gas sector and it’s artificially forced upon these companies because they don’t have the export capacity to process all this gas fantastic um once again make sure where your companies are in this in this zones are they the lean gas dry gas are they in the oil Rich liquids um are they outside the hydrocarbon charging area and what’s the pressure uh regime is it under pressure normally pressured or over pressured so you can see past this line it gets into an overpressured Zone which is what causes the condensate and oil to become ngls and and more of like a volatile um even more volatile oil the more pressure the more you uh conscript this this oil uh the more it becomes kind of like a gassier Zone per se this is great so companies have started doing this I see they start putting the well averages the path totals the breakdowns move it to what Delphi was doing start putting ip30s ip60s ip365s I also like this truck this uh table it shows you what they drilled how many Wells where it is when it came on stream the payback period and where are they currently drawing this is this is what we need we need this level of transparency so kudos to Hammerhead they’re going public in February they know what the investor wants they’re going on the NASDAQ they have pre-planned all this very smart very very smart if you’re an opaque management team that wants to keep your secrets you want to uh you know not let people find out what’s happening you don’t want to make things clear all the power to you people are just going to stop investing uh in companies like that um when other companies are putting out all this data okay um the other thing to keep in mind with your companies is where are they are they close to the major gas plants here for example um Hammerhead is very close to the energy transfer Patterson Creek Gas Plant the cnrl car gas plant they’re close to an oil terminal they have other sales capacity the gold Creek Gas Plant you want more options if you’re a monthly producer and I’ll talk about this a little bit later on if one of these gas plants goes down for any reason you’re stuck you can’t produce gas you can’t produce oil you can’t produce condensate bad so it’s good to have more options in your area where you can send gas send oil um you know this company has done a really good job and I’m not I’m not saying go invest in hammerhead I’m just sharing that they’ve done a really good job um at positioning themselves where they have export pipelines also keep this in mind we have the amalin here which is a very uh lucrative base in Oregon and Washington um and California we have Chicago and then Dawn that goes out east into the Toronto area each have their own pricing and I’ll share more here as I kind of go on but but the more pipeline routes you have the more you can take advantage of pricing power in certain hubs especially places like California um yeah and and Washington State and then the LNG terminals on the Gulf Coast and Canada for that matter okay so now we have a Paramount um here’s a type curve on Paramount you can see how the type curve is a mixture of the best Wells and the worst Wells and the medium Wells this is why it’s very difficult for a small company to make it in the monthly because you might get two or three of these lower quality Wells there’s your company gone right there you just blew 30 million dollars um on just the wells you might have blown another 100 million building your infrastructure maybe more and now you don’t have the money this is what took a lot of companies under in 2016 2017 18 19 20. um so when we said type curve there’s Goodwills and there’s bad Wells and there’s medium Wells so a type curve is only generated after various drilling um and production has come through so just keep that in mind if you’re investing in a company with one or two or three while program the type card goes right out the window it doesn’t really mean much um because you could hit a really good well you could hit it really bad well um you’re not gonna hit that exactly the medium well look how many worlds in this in this chart are exactly the medium well five percent less um so um yeah so and then they share with you your sort of type curve information this is a cool chart that uh Paramount has it tells you the well cost and then how many times the walls have paid out so you can see how as The well costs have come down the per will payout how many times the world pays out over its life has gone way higher um I don’t like them estimating this because they’re effectively telling you what the well is going to make over like a 40 to 60 year time frame um not quite relevant maybe they should they should turn down their EUR to show the next 10 years let’s say or the next five years as opposed to like oh yeah this world will produce till 2065 and we’re just going to tell you how much netback it’s going to generate a a tiny bit misleading although accurate tiny bit misleading still kudos to them for for sharing this um they did the same for their wobbly Wells you can see how the type curve has adjusted up here because they were initially drilling really bad or lower quality Wells and now they’ve really um fixed up their wobbly drilling such that the type curve can actually be adjusted up based on the most recent drills so um really good job once again sharing all the information they’re sharing what the wells cost um they’re sharing how much money they’ve made off each single well so far Paramount has been one of the top performers from 2020. lows of 2020. along with management strength transparency transparency tell us what’s happening I don’t want to be caught off guard with random stuff that was not well disseminated before the fact costs keep an eye out on this completion costs have been going down for years years five six seven years now they’ve ticked back up what costs are going to go back up this is not an opinion this is a fact well costs are going to go back up sometimes 10 15 20 30 in certain cases so as you’re running your models um we already see this in the capex that’s been increased in certain names but there’s going to be further increases and and keep a close eye on the The Well internal rates of return some wells are very sensitive to increases um in the dcet cost some of us or not so watch the cost just watch the cost watch which companies are able to keep their costs low versus which companies are really getting affected another reason why small companies are at a disadvantage when they can’t sign up for a 10 20 well drilling program or a 10 20 wall frac you’re paying top dollar um to mobilize that unit bring it in the company wants more money because they gotta deal with your um you know your sites and and all that for only one or two um jobs all right once again transparency excellent job by Paramount they show every single well what it’s making Peak 30 day and what’s made cumulative I would like to see still the ip90s and the ip365 but this is a great fantastic start um really gives me insight into what’s happening uh you can see how the Wapiti Wells are relatively cookie cutter in terms of production you can see how the car Wells some are good some are bad uh some are neutral medium goes through your type curve very similar right very similar the way they make these five curves is off that the consistency of your top well results um okay so we’re about two hours in so um I think I have about 10 or 15 more slides to go so we’ll finish that up we’ll do a little q a session and uh maybe we’ll we’ll call it there without having to take a break here so tourmaline huge acreage lots of undeveloped acreage they own lots of gas plants there’s a reason this is a blue chip of the Blue Chips they have control over almost everything here Reserves I mentioned this earlier as they started to delineate more of the undeveloped acreage the reserves are going to go up substantially we know the resource is there it just has a translated into Reserve because they haven’t drilled it well right next to it so as as the companies develop as they delineate the reserves are going to go up very substantially very very substantially which then comes into net asset value which is then further can be increased by higher oil pricing uh well well and gas pricing here’s tourmaline’s Wells um you can kind of see the internal rates return here and how many future development locations they have this is the big boss along with cnrl as well but but cnrl has other things going on so the gas portion of their business is relatively small as part of the company compared to a tourmaline um where the gas is their business for the most part um along with the Charlie Lake and the Conroy and all that um oil-focused stuff uh Wapiti quality so looking really good um you know can’t can’t say much wrong but from lean it’s uh very well managed to very well run very well executed company look for companies with LNG Supply agreements like tourmaline and Arc 15-year Supply agreements selling at jkm 140 mcf per day jkm is currently trading at about 20 U.S and mmbtu plus so you’re taking gas that’s worth three dollars Canadian Echo four dollars five dollars Canadian you’re now selling it at twenty dollars U.S pretty substantial so something to incorporate into your models for sure um especially with the big producers it can make a massive impact owning facilities always check how many facilities does your investment company own not just because they save on processing they save on Transportation they get to control their own destiny but because the plants are worth a lot of money Arc has about call it 1.5 BCF of processing capacity maybe more 1.5 1.6 that’s worth about two billion dollars Plus in facilities and infrastructure nobody ever talks about this when they when they start running models on cash flow they started running models on net asset value there’s a lot of inbuilt infrastructure um infrastructure upside that is is not really shown in the stock prices so once again all of this changes over time it changes as more people believe we’re in a bullish oil cycle oil and gas cycle um none of this can happen overnight this is going to happen as time goes on um you know people ask how did oil and gas companies start getting valued at 12 times cash flow in 2012. they weren’t exactly getting valued at 12 times cash flow they they there was an inbuilt um inbuilt upside from the infrastructure from the pipelines from the roads from the undeveloped acreage from the acreage that didn’t have reserves associated with it so when you take all that out they they weren’t really trading at 12 times cash flow they were maybe trading at six or eight times cash flow so we are going to get back there we we are going to get back to these things it takes time it takes people believing in the cycle it takes the companies generating a lot of cash um getting rid of their debt um and just more investors looking for uh opportunities to beat the risk-free rate Supply demand you can see we’re not building that much pipeline capacity export capacity in Canada by 2026 we’re adding call it three to four BCR per day not not enough to really Crush uh Western Canadian gas pricing so um you know it’s going to be slow growth so a slower growth call it Basin than some of the U.S basins once again something that I really like rather than companies going crazy and just over capitalizing everything Arc also has Hitachi West completely undeveloped it’s 200 000 acres and they only have 5 million boes of our of reserves associated with this again I I keep saying the same thing I know but but in the montney the undeveloped Reserve value is not being reflected in in most of these names as they develop these as they delineate these you’re going to see the reserves value start to Skyrocket up um as the as the reserves uh evaluators give them credit for this we already know this is mod a there are wells here that are making oil and gas they’re allows here they’re making their own gas their Wells here and here unless there’s a huge geologic unconformity that just appeared out of nowhere and the 3D seismics are fake I mean there would have to be some serious fraudulent uh issues or a serious geologic uh problem for for me to say that this isn’t montany and it’s not going to be as productive as whatever’s around it but the reserve evaluator will not give you credit for it until you drill so people saying that all companies are trading at their you know 60 of the reserve value try and run it what are they what are they being valued on a resource value again this is where Savvy investors can make a lot of money by by pre kind of front running these things happening um and why I choose to kind of allocate my dollars in the montney in in specific names that that have this upside um as opposed to other names that have already delineated um their packages foreign yeah so I’ll get to these questions here at the end um as well Michael uh so yeah thanks for asking I I will get to it um here’s your taxi phase one as you know about a three-year uh cash Capital commitment at that point it could probably flow for 20 to 30 years um making a pretty relative uh relatively nice netback and keep in mind this is that 65 WTI and 475 us gas if oil goes higher or if gas goes higher your net back your torque increases here’s my problem with our resources why I I sold this company in June um reistat sent me this information in about April or May top Wells by boes per day 2017 drills 4 000 Plus 2019 drills 3200 was the top 12. and you can see the bottom has kind of fallen out of the top 10 compared to here by 2021 the top well drilled by Arc resources uh Slash 7 gens in 2021 in the capital montany wouldn’t even have made the top 10 of 2017. degrading acreage IBL I’m very against the Permian I’m very against eagleford I’m very against the Bakken Marcellus Haynesville all these Shale plays that are seen degrading acreage there’s a huge cost component to this when cost when we’re in a cost inflationary environment when you’re Drilling and completion costs are going up and your wealth productivity is going down double whammy impact why bother when there’s other companies that have um fresh acreage with increasing productivity why own these names my that’s my investment thesis this is not investment advice that’s the way I choose to allocate my dollars and that’s why we’re waiting for our resources to FID their prolific attache because Apache is fresh as I talked about huge acreage not not that much reserves yet and they can grow production massively here and keep it sustained for a huge period of time so waiting on that it’s a huge Catalyst for Arc and in the meantime the capital Wells are still better than a lot of liquids Rich Wells that are in the area so the cactua car acreage is probably the top icreate in the area in terms of oil liquids production and gas production so don’t don’t take this as a as a sign that arcs acreage is much worse it it has degraded from a like top one percent acreage to a top 10 acreage at the same time there’s other companies that are drilling poor quality Wells on their sort of top acreage so um there’s a reason seven gems was able to grow as fast as it did and there’s a reason that um Arc wanted this this asset specifically um as opposed to some of the other montney that’s that’s undeveloped because this is a cash flow machine all the gas plans are already built all the infrastructure is already there so still a phenomenal acreage um that that still has a lot of Runway I’ll put it that way okay this is uh Advantage Oil aav you can see the bulk productivities are increasing substantially massive from 2020 to 2022 we see about a 40 increase in wealth productivity amazing they’re also growing their processing Revenue so owning gas plants you not only decrease your own internal cost you can process other people’s gas and make money off it so um if you’re in the montney if you’re uh if your investment company owns their own processing equipment watch for this to become kind of a bigger thing as time goes on uh especially companies that can expand their gas plants and have that room now this is something to be very careful of we see here producing days versus cumulative boes and they have their five different areas labeled on this any investor looking at this could say oh the Wembley D3 oil is not looking that good whereas the glacier upper gas is looking uh you know solid wrong so because the Wembley D3 is an oil asset versus the other ones are a gas asset the mboe barrel old equivalent of oil is worth way more which means this bottom line is actually your best paying payout well I don’t know why they’ve put this slide in here like this but when when you’re seeing type curves try try to break them down into gas and oil separate because this is a completely misleading slide and I think people are not not gonna fully understand this unless they know the difference or to look at this table specifically um so so just keep that in mind the montney has gas oil condensate volatile oil Rich gas dry gas you can’t just run a type curve on boes and start comparing things um I still appreciate the effort I like this I like this craft I like that they’ve given me all fit on the same graph but it would be nice if they broke it down um into gas and oil uh as well so here’s your here’s your uh pork upside torque on the on half cycle economics you can see how the internal rates of return just just become almost nonsensical if you run if you start running things at like six dollar ACO 100 oil your internal rates of return go go up to like three four five hundred percent um and the npvs become similarly astronomical um yeah thanks uh um okay so the next thing we have is uh we are going to be looking at where are your companies selling gas too are they selling into ACO Don Sumas Malin Henry Hub Alliance LNG Etc so [Music] a little SEC here so why is this important and why why do I focus on this because most companies will only tell you what their Benchmark pricing was as in what price they got in that specific um call it hub we need to break it down to what the netback was so if you’re sending gas from Alberta all the way to Chicago it’s going to cost you you’re going to pay a dollar 25 Transportation cost so foreign if you’re running modeling around gas price sensitivities around how much money they’re making at each hub always take into account the processing the transportation and the fuel cost to get to get your gas from there to there from there to there and you may end up finding out that even if Echo is a dollar cheaper than Don or Henry hub it might have made more sense to sell into Eco because you’re not having to ship the gas all the way so people get confused about this all the time they say oh the Dawn and Henry Hub is always more than AKO you know uh how come we don’t descend everything into Henry Hub well because it costs 1.57 uh differential it costs you 31 cents of Transportation there’s other factors involved um in doing that um uh okay thanks Eric I I really appreciate this I’m uh I think people are uh are really uh wanting to hijack these faces today so uh uh appreciate your uh help oh yeah I was also going to share this so I was talking about the Frog water pawns earlier so here birchcliff has about 50 000 uh um first Cliff has enough water storage and infrastructure that they’ve taken 50 000 trucks off the road since 2017 uh better for their dcet cost it’s better for their just overall uh emissions reduction and ease of of operations this other statement burstless liability management rating is 17.27 compared to an industry average of 5.23 your liability management rating is effectively your assets over your liabilities your deemed assets divided by your deemed liabilities burst flip is saying that their liability management rating is 17. they also have very low Breakeven Supply costs so why have I never looked at birchcliff as an investment because if your liability management rating is so good and your break-even supply cost is so good why are you so focused on being debt free like why why is that your goal you you have the safety nets already that you don’t have Arrow you have really good Wells you have pretty low Supply costs your dividend is not outrageous why are all these companies wanting to go debt free and I know I’m going to be swimming against against these sort of uh uh uh the wave or the flow here but I like management teams that can comfortably run a company with a bit of debt with a little bit of a hard debt component to it that shows me that you are good at managing the company you can actually generate value for me using financial leverage if you want to run a no debt company you effectively give it up you’re just saying I don’t want to take any risk and sure a lot of investors are happy with that they want you to have no debt um that way they feel safe from any bankruptcies and all this um but I’m just giving you my investment opinion I like management teams that are comfortable and uh you know competent with running a little bit of debt and they they can uh effectively manage the company through that and through the cycle as it kind of continues um of course this has given my bullish outlook on oil and gas um but financial leverage makes a huge difference to your share price performance over a prolonged bull market scenario it’s a massive difference it’s it’s not even close it’s not even in the same ballpark if you’re running a little bit of financial leverage running more financial leverage and the commodity price cycle is good you’re gonna vastly outperform your no debt peers um so anyway uh I don’t want to keep talking about that but I just something I wanted to share uh from my own investment uh sort of thinking and that comes from somebody who’s never run an oil and gas company I’m just saying as an investor in these companies um that’s what I look for and you can see my portfolio reflects that so again if you’re investing in first look today you’re paying for about 20 years of delineation that’s already been done you’re paying for 20 years of growth that other investors have taken the risk on of doing this and we’re buying companies now that are in their field full field development phase um not a lot of opportunities like this usually out there because by the time we get here these companies are so overvalued that it doesn’t even make sense to invest in them as you saw in the tech space over the last few years okay so um yeah uh okay burstless risk is that they’re totally unhedged um it’s a fair it’s a fair point but uh I can talk about this another time but uh yeah I don’t think like being being unhedged is uh specifically a a risk per se um you know you’re running a company you need to have an outlook on the macro cycle if you’re just you’re just running willy-nilly um may not be the best way to run these companies but uh hey I’m speaking to somebody who’s never run an EMP so uh take everything with a grain of salt I speak as an investor uh only at this point so um there’s a question here on what’s my preferred debt to equity ratio I’d say something like a 25 debt and 75 Equity should be able to be ran uh with a lot of Corporations I’m not I’m not advocating for for 50 50 split uh but but something like that I think is is pretty reasonable um in my perspective who if I’m pain management hundreds of thousands of dollars and millions of dollars in share options on top of that um you’ve got to provide value so here once again we see drilling costs going up and we see total costs going up uh new Visa is saying 2023 it’s going to go up further so they are comfortable putting this out already we know from previous experience that the inflation in 2022 came in the second half I believe the number that was given to me somewhere was seven percent inflation in in uh in in the first half and 18 inflation in the second half so the fact that investor is only putting a very low safety net here I guess we’ll see how uh how uh how true this was or or how accurate this was when we get there at the same time they’ve done really good at filling up their gas plans so I’ve spoken about this in other companies where they have half half filled infrastructure or low-filled infrastructure as you fill that infrastructure through production growth your operating cost goes down and that is effectively the same as the oil price going up so when they brought their Opex down from 20 of BOE to about 15 they’re generating the same extra margin as oil price going from 70 to 75 or 90 to 95. uh the gag emissions I I do want to mention this because there’s a lot of BS out there that oil companies are polluters and they just you know dump stuff everywhere I can tell you for a fact in Canada the companies themselves are beating all the AER requirements and uh most of the other requirements that come in they’re already there so companies themselves do a very good job at uh reducing emissions reducing frock water dumping uh reducing spills and and having lots of Automation and uh kind of control as to what happens um in their fields um you know before they regulate before the regulator has to step in and and and and force things as it is in some parts of the US and worldwide the montney supply demand is always going to look good because the oil sands and heavy production looks to be continued to to rise at about three to four or five percent rate per year and we need to dilute it and therefore we always need the Western Acadian condensate which comes primarily from the Monte and the kubernet so in that way they’re producing a very high Valley liquids that trades at one to two dollars sometimes up to five dollars above WTI and that’s US dollars so a pretty good liquid stream um that that they have uh that they’re selling into here is one of new vista’s pads I believe you can see them the modular design uh with the with the modular uh call it inlets or refrigerators or lehighs you can see the tanks flare stock um you know needle powder uh pretty well built oventive so Ubuntu has done some really good uh execution internal drilling speed laterals sound efficiency password completions and they have the top Wells so they have the top wells in Alberta slide PC in terms of gas production some of them making over 40 million of gas um I think this is first month rate is what it’s giving you yeah so just to put that into perspective 40 million of gases 6 000 boes per day out of one well so very nice and that’s really where a lot of the productivity gains have helped companies like event here um just destroy their competition because of where they are in the basin um as well as the top uh some of the top cumulative gas Wells as well uh belong to uh open tip look how how much better their top well is from the second best well almost 60 to 70 better so I’m doing really good stuff they are declining a bit in terms of their liquids yields and um some of their production numbers don’t seem to be increasing which makes me think there’s a very high decline rate uh but I don’t look out of into that much in detail but when you look at companies with top Wells always look at their ip365 as well so you get an idea as to are they over producing these Wells right off the bat to get really good rates and then the declines are are a bit too high uh compared to their peers Spartan Delta so they have a different kind of map they show you the actual Windows oil volatile oil wet gas dry gas um you know you can overlay your company’s a crate on this and see where they are and see they have some interesting delineation acreage down here when you run it here very few Wells have been drilled in this area same with Flat Rock where a kelt also is so if these areas can get delineated another massive boost to reserves uh and land value so you can see catboy right here you can see kind of some of the burst clip development um shell in Canada or sorry Ubuntu and then you can see how Spartan does has mostly fresh acreage and uh you know one of the reasons I wrote my Seeking Alpha on them was was exactly this and they ended up being the top performer in 2022 in terms of share price appreciate appreciation so um you know figuring these things out up front and front running the stock like as in buying it early before the market realizes the these things is really what what’s going to generate uh Alpha and a lot of these things are public they’re publicly available there’s nothing that’s hiding you don’t have to talk to management it’s pretty obvious that Spartan Delta’s acreage is um quite undrilled uh and and pretty much in the core of the Monte uh for the most part especially this gold Creek stuff which is really good and has some of those um natural fractures that I’ve talked about you can see how they’re completely destroying their type curve this was a very strong engineering and management team and I will just go a little bit into detail as to why because Spartan Delta has all this acreage I mentioned earlier companies with a lot of acreage can afford to widen their spacing that’s exactly what they did you see this dark green line is 270 meter spacing instead of the 180 and 230 meter spacing meaning 270 meters between Wells as opposed to less that is going to drive each Well’s productivity much higher you can see how they are absolutely demolished the type curve and I expect to see this continual growth and outperformance going forward it’s one of the reasons why Spartan Delta’s production estimates are completely fake they themselves are completely sandbag what they’re going to produce so um you know in in my uh call it eight times free cash flow model I have a huge increase in in Spartan Delta production baked in compared to something like a Pipestone or a um you know whatever the the other companies in the area I’ll say yeah um and you can see that yeah the oil rate speeding and the gas rate is way higher way way higher than um than these older Wells at lower spacing and this is all public they put this in their corporate presentation um not not much work has to be done to figure out which companies are going to outperform their peers within a specific kind of basin here’s Pipestone they’re also in the kind of high condensate oil Fairway relatively under acreage you can see they’re drilling to the West because that’s where the pipelines and infrastructure is um you know and you can see a lot of the activity has been in this a belt per se including the seven genes catwalk and why it was so good just so good um and economic um a little bit more on typestone we see the Western development we see some delineation work going on here watch this to show up in reserves so as April as well they can now get some benefit of reserves around as well and um you know here as well and as well as on the east side you can see how they say CGR on the west which is condensate gas ratio on the East it becomes ogr oil gas ratio so we see there’s a there’s a defined line here where they’ve they’ve gone from a condensate Rich oil uh a condensate Rich gas to like a more of an oil Rich uh gas the new world that everybody was threatening all about about the H2S content um was a really good well so not not really sure what the concern is um the CGR is a little bit lower than the other parts of the uh I call it Pipestone acreage but it’s nothing out of the ordinary or out of the norm by any means uh H2S content can be dealt with it’s not a big deal you yes you have to install amine us skids yes you might need extra scrubbers on site yes you might need to batch with biocide big deal it’s a it’s a minutia thing uh when you have this much acreage that you just delineated and and show that there’s montney upside here um the other thing is H2S doesn’t just come from natural reasons you could have introduced H2S in the formation by using uh contaminated frock water you could have uh let let something settle there and the bacteria just eats up the oil and creates hydrogen sulfide so by no means is it a company breaker or anything um just my opinion I did not invest in Pipestone because I’m not a fan of the management team uh but on the overall the geology looks great and I I don’t see any sort of engineering issues um at this point foreign yeah so the reason I sold Spartan Delta was because I was quite confident that Spartan Delta was uh lining up for an acquisition back when I sold it uh called it mid-year last year and um they they did not end up making an acquisition but uh of course they recently just said we are open to uh mergers and selling ourselves and all this so um that was my indication from from my conversations with management was that they were you know looking to kind of prove this thing out and then either build or sell and I just didn’t want to be involved in in that sort of thing and at this point Spartan dealt has vastly outperformed their peers so I see um you know I see other opportunities that are just relatively more attractive to me um kelt so nice little land package and I would once again focus on the type curves so so this one is much lower IP rates but you can see it’s 57 oil versus the pus Coupe is much higher IP rates boes per day but it’s 90 gas so just just keep this in mind where is your company’s acreage what is the liquids ratios along with the IPS and kind of run your own own netbacks on it like say gas is worth twenty dollars a Boe and oil is worth eighty dollars a Boe and then you get a better comparison Apples to Apples between the different montany acreages um as well you can compare to other areas like like the Spirit River lower Charlie Lake area monthly stock according to celt you once again see what we were showing as you go from BC to Alberta the upper montany cuts out completely and you get the middle and lower montney um kind of becoming your main main zones of production uh over here so yeah this is showing porosity I believe again on these on these charts foreign since 2011 you can see the the geologic modeling as far as liquids and gas very very good modeling already out there on the entire formation as well when Kalama first started in 2011 they were outside the known montney area over the next four to four to six years that area became part of the modern day so they’re still being work being done on going outside and trying to find the edge of the formation but partial companies they’ve got so much acreage within their own area they’ll just keep producing that and then as as the time comes a little bit of exploratory drilling but it’s mostly the smaller producers that are that are doing this the Celts and Spark Delta of the world and uh you know trying to hit another Big Monty area but for the most part uh not not too much going on in terms of extending the monthly boundaries uh at this point we also get the advantage of the old vertical Wells that were drilled way earlier so just to go into the history a bit I mean this is this is a decades Decades of work that we’re buying today uh we see Blackbird and Delphi and what they were testing um you know you can see there’s a well here 230 boes per day and there’s a wall right next to it two miles you know mile away 8 000 boes per day so you know there’s a lot of work that’s gone into this the proper well trajectory the proper well spacing the proper completions grilling and um a lot of stuff going into this this sort of fresh acreage and the scale of the acreage that we have in the Mountaineer uh here’s a little bit more about that on the geology the underlying Laduke reefs the caqua work and Wells that used to take 60 days to drill one mile now you can drill them in less than a month and you can drill three miles in less than a month so you know the the dcet cost that investors are facing is a lot lower of course all the extra money comes to us so this is one of the one of the things that I I kind of think about a little bit is that what people talk about service a service is making a lot of money um sure sure they can make a lot of money and their margins will go up and they’re going to have more activity but like frocks used to cost 50 million now they cost 4 million so you know you can just just think about that the revenue on that one Frac Fleet has gone from making 15 million to 4 million and sure the jobs are faster so so you’re not stuck that long but costs itself have come down significantly um and and one of the things that more and more of the activity is in these unconventional shales montney Duvernay Etc and they have just become so efficient at Cost cutting their dcet that uh I’m not sure how much they’d be willing to pay as as cost inflate would they just start cutting their um sort of growth targets as opposed to paying way more for dcet water pits so this is um which I’m not even sure which company I pulled up here but uh companies that own freshwater pits I talked about this earlier a regular frock is about 20 to 25 to 30 000 cubic meters of water if you have the freshwater pits you can not only use them and save yourself some money but you can also sell that water to producers that don’t have access to fresh water so it’s a nice little bonus um stream that they can get uh fire blocks one it says right there this is from from the Black Swan uh corporate presentation which is now of course owned by tourmaline and you once again see see the progress slash Patronus development they delineated the entire thing and then they started doing their full-scale field development um over here same same down here um okay I think we have two or three more slides left so this is something the world trajectory that has changed over the last few years producers used to throw blood Wells but now they’ve figured out if you drill it this way your liquids will gravity feed kind of into the closer to where the wellbore is um where the the heel of the well is so something that’s changed over the last little bit likely has resulted in very good productivity on liquids and gas because liquids used to get stuck in certain places and kind of freeze out some of the Frog stages uh so very good this is what it looks like so as you can see uh the Monty is not a true Shale it’s a sand siltstone Reservoir you can see the scrapes of oil and then the gas gas is kind of coming out in here with pretty decent porosity here it looks like way more than five percent but uh yeah again I’m not a geologist I’m still learning a lot of um geology stuff as I go um they’re pretty interesting stuff and very vital to knowing some of these companies and what they’re doing so you know corpse you can see kind of that that corpsey look that it has and the last thing to focus on is shutdowns so I said this earlier is that when when you’re producing the montney you need gas processing capacity and we have multiple companies now have trouble and have really bad production numbers because their gas processing went down and um most of the companies that are having this problem are ones that send gas third party so celt Paramount um you know kind of the two big ones Pipestone energy as well where the um their outages at Kira Wapiti and and all these issues so having companies that own their own infrastructure and do the maintenance on it regularly because they know if they don’t do maintenance on the gas plant their entire production stream could go down um is is I think going to become a bigger Factor going forward especially as a Monte gets more production and things get squeezed compressors are running full bore and um you just don’t have that safety net anymore that maybe you used to three four five years ago so uh you know one of the things to really focus on sure it costs more money to build these things out because you yourself have to put up the cash as opposed to a third party but um I’ll just put it this way there’s companies already out there that have already built gas plants and processing and infrastructure they’ve already put the money in and they control their own destiny you know I mentioned Arc resources earlier there’s there’s other companies that are smaller that have that same flexibility and control and I think they’re just gonna have better production numbers going forward and they also own the gas plans which is again um not being reflected in the share prices just quite yet so with that I think um we’ll wrap it up uh once again really appreciate everybody joining in and the patience with my little delay last week so I appreciate that and um for anyone that joined late the recording will be on YouTube here shortly probably the next three or four hours um this this uh this new laptop I bought actually got uh 4k on it so I’ve been really liking the quality that it’s been putting out so um yeah I think uh once again I think my my email and my DMs are always open for people that are have any suggestions as to Future presentations or seminars this monthly session was suggested to me uh by somebody else as well along with some of the other ones that I’m holding uh in the first two or three months of the year as I mentioned earlier I will be updating my portfolio uh called it midweek mid or late this week and um you know look forward to discussing some of the changes in uh maybe one of the Twitter spaces or in next week’s q a session and uh yeah it’s been it’s been a hell of a 2022 for for all investors um you know we had the the initial start to the year then we had the June highs then we had a drawdown at the same time people who maybe didn’t buy in in 2021 maybe got an opportunity to to buy in a pretty good pricing uh Equity pricing in the latter part of last year and now we’re going to 2023 but um some you know interesting companies out there they have got a year of really good cash flow and free cash flow and uh kind of looking forward to see how the cycle goes and uh I really want to make make one one point is that and I said this at the beginning of the presentation is that oil companies are are not are not you know like a typical business that okay I’m gonna open a coffee shop I can open it in six months like it’s not like that there’s an iterative process to it and there’s volatility around that there is obviously the macro cycle that that that dictates a lot of things as to what the companies can do but um you know going out and taking Victory laps both ways either you made money or you um you know you’re you’re making fun of the people that that didn’t sell in June or whatever Victory lapping both ways over a six-month period um is doesn’t really mean anything you’re just wasting your time to be honest um especially because a lot of these companies have gone through a six or seven year down cycle so they’re very hesitant to really go out and and do a lot of money spending projects they’re hesitant to capitalize their projects they’re still some of them are still paying off debt before they can go in and really show the world what their acreage is worth so there’s definitely a timeline component to this that is often ignored and um you know at the end of the day it’s it’s whether you have that sort of investment timeline or not because um it’s gonna take time uh nothing in here is going to be done overnight especially in a high inflation uh High supply chain issue environment everything is going to get take time everything is being delayed and things are coming in slightly over budget in in certain cases and uh just the nature of the game I think uh you know a lot of a lot of people may be new to the oil sector and uh you’re you’re kind of getting frustrated or or losing patience and uh you know I’ll tell you I’ve been in this for for about 10 years now and uh the the goal always was that hey when the cycle comes you always get a chance to make huge sums of money and um yeah I I believe we’re in the cycle now and I’ll I’ll share more in my macro update here next week so um yeah thanks again so we’ll do some questions here were some earlier questions that kind of got missed because somebody was uh sending a bunch of spam so if you can just uh resend those I would appreciate it uh paraday nothing really to add on parody parody is a company that’s very exposed to gas so if you’re buying like if you’re buying a PurePlay gas producer it would come into those peers they have very little oil uh production per se even even though they do it’s very sensitive to gas pricing and Echo pricing has not has not been doing all that great um the only thing I can say is that parody trades at about one-seventh devaluation uh that tourmaline does so now you can say that um you know parody is junk and all this one seventh devaluation it’s up to you to decide whether that is accurate whether that properly puts into account the increased risks of buying a smaller company uh a high Arrow Company versus a tourmaline I cannot give you an an answer there is no like cheat book that says oh yeah something’s trading at this much cheaper than it’s a buy it’s it’s up to your own interpretation I can just give you the facts one seventh the price um is Advantage one of the companies that have built infrastructure yes yeah the glacier plant is a 400 million standard cubic feet plant that also processes third-party um revenue and it’s also great because it once you’ve owned your gas plans you can make deals around carbon capture around waste heat recovery uh around uh modular design upgrades Etc so companies that own their infrastructure effectively control the other parts of the value chain call it as well blueberry First Nation thoughts I don’t really have any thoughts uh your share prices have obviously spoken the market has spoken that it was a nothing Burger I still think there are significant headwinds to call it full-scale field development there are going to be delays that is just the way the agreement was structured is it good that we have something to work off of of course definitely but at the same time um I don’t think it made the difference that a lot of people maybe thought it would um because we’re never going to return to those free you know freestanding agreements where every single World license is just approved you know um as if there’s nothing wrong we are probably never going to return to that in the oil and gas industry there there’s going to be on a lot of things but it’s good to have an agreement in place um keep in mind we’re about 15 to 18 months delayed on when the agreement was supposed to be signed so people have already lost patience and now they don’t know what the delay is going forward um that being said I will be completely clear I did not read it like all in detail and discuss it with anybody um because I I don’t buy companies that are exposed to this problem so I it’s it’s a very legally is issue with a lot of Deep um kind of rooted problems that may re-pop up and I for the most part um just refuse to invest in in any companies that are called majorly affected by this yeah you bet no thanks thanks for joining us always it’s always fun I mean this this is what makes it fun I was almost feeling you know hey I haven’t done done a session in uh you know two months now to to yeah just over two months now so so I really wanted to get back into it and then last week you know just Wham last minute I got I got slammed with this thing so uh glad to be back and I look forward to sharing more here along with Twitter and spaces and everything else um as far as the Saturn ridgeback analysis I haven’t had time to really go through it in detail so I don’t want to make um huge again sort of uh strong opinions what I will say and I’ve said this before uh I believe on a different space in 2012 growth companies were trading for eight to ten times cash flow and a hundred thousand dollars plus per fluent Barrel that was the metric that was being used um so when people are now trying to tell me that buying something at three times cash flow is a bad deal um justify it go ahead I’m very happy to jump on any space um and have a back and forth discussion but if your bare case to me is that oh oil companies will never get re-rated ever again that argument holds no water because you unless you travel back from the future and you’re telling me this um your opinion is the same as mine where we’re just arguing over what could happen so I’m telling you that oil companies used to trade at these multiples and when people believe that oil is in a oil scarcity environment and um you know for the foreseeable future companies will once again trade trade out those multiples is it going to happen in six months no it’s going to take a bit of time especially with a lot of the the way the money the money allocators these days can’t invest in these companies yet um there’s kind of a gap void that needs to be filled but uh I’ll put it this way people always want to make money always no matter who it is as soon as money enters the table a lot of other things go out the window and the oil and gas industry has shown now for three years but two years let’s say the 2021 was Market matching returns ish 2022 absolutely slaughtered the market nothing was even close like nothing no other index was even close uh so 2023 now if oil can start to outperform again for call it you know part of the Year people will start to pay attention so um so yeah when when Saturn bought ridgeback call it you know 17 000 boes for 500 some million uh called it 30 000 flowing Barrel even if they don’t have the inventory Runway that maybe some of the other deals out there did uh I just like deals I just like deals at sub three times cash flow you know some four times cash flow they’re all good deals uh as long as you’re not buying Shield so I will caveat that High decline Shale if you’re buying High decline Shale with low inventory um yeah I I just don’t even look at those companies um yeah you bet so so I got a lot of questions on this uh 88 energy that I added to my personal portfolio so again I’m kind of gonna be swimming against the a stream here so um Alaska has huge reserves of oil not just in the North Slope but there’s natural NPR National Petroleum Reserve that the US maintains in Alaska uh where conical Phillips is doing their Willow project there’s a pickup project um call it hundred thousand barrels per day plus projects that are coming online um the problem with the NPR is that it’s an environmentally sensitive area so even though it’s a prone Reserve as far as Drilling and whatnot it’s it’s just in a very environmentally sensitive area there are two companies um that are that are kind of have huge assets and are delineating assets right on the Dalton Highway the Dalton Highway being the highway that goes up uh through Alaska uh all the way to the to the north um a North Slope and on the Dalton Highway you have the Taps the trans-alaskan pipeline system so you have a road and you have a pipeline right there the tabs pipeline is about 25 forward so there’s 1.5 million barrels of extra capacity in the pipeline uh still to go and our company is going to find something you know maybe maybe not but there are two companies 88 energy being one of them that that’s really spending time there um to to delineate to find what’s happening there and uh I’ll put it this way Pantheon’s result was a success they got out of 0.75 mile of lateral they got 500 barrels per day of liquids and 2.5 MMC of per day of gas yes you’re flying flowing into flare so the numbers are you know over uh overdone as opposed to flowing into a pipeline but at the same time that’s about a third the length of shale wells in the Permian and they made 500 barrels of liquids and 2.5 MMC are pretty of gas early Shale results were not close to this early child results in the Permian were costing a lot of money and they were not producing at these sorts of rates so now now that there’s companies trying to lineage stuff in the in the sort of Alaska Basin I think there’s a lot of shale potential there um don’t forget Pluto Bay is the largest conventional field uh that’s that’s been discovered in the US and I think I want to say yeah in North America for sure so there’s a lot of potential um companies have spent decades trying to find this acreage and the first of all result proves there’s not only a working petroleum system but they can actually produce it uh free-flowing uh on its own um at really good rates now that’s on a 0.75 mile lateral pale Wells are two to three mile laterals so once once the development gets to that point um there’s a potential that this acreage becomes kind of like the early Permian um early Permian when everything went crazy stuff started selling for a hundred thousand uh dollars of flowing uh per acre forty thousand dollars of thought uh sorry per a per acre so are we early yes is Pantheon’s corporate structure good no that’s the reason I avoided it that thing is deluded All To Hell there’s there’s no value left in that company because there’s so much dilution they don’t have money they they don’t really have the money to even drill another well so I said okay I’ll buy the company right next to it that has no debt it has very good acreage it’s in the same SMD uh shelf Market um shelf margin Delta uh acreage and um we’ll kind of see what happens that’s that was my play there um when the well results came out I was very happy because uh those are exceptional well results the company Pantheon itself is not a good investment just because of the way that that the the share structure is um but I’m willing to take a bet on this uh I did a lot of research into the geologic upside um not just the SMD but the other basins on top and uh as well I like the fact that um you know they’re they’re on the highway they can drill year round unlike other parts of Alaska and they can build gravel paths and drill and produce Wells year round and 88 energy will be drilling their their next Prospect here in March or April but um yeah and it’s down 75 since last year so it was a speculative play on a geologic um phenomena where a different company is spending all the money to delineate it and I can have the chance of finding something not as big as the Permian but as productive as a Permian and definitely would scale which is going to become quite valuable to the US uh as the Permian shows its uh kind of lost signs of growth so that’s not I will have an Alaska focused session in late March I believe so I will discuss everything in more detail but because I got so many questions about this I think this question warns um a little bit more of a detailed answer uh as well and and I’ll give everybody full disclosure I bought this at about uh 0.0062 cents so um yeah that’s my full disclosure uh statement there uh Saturn’s acquisition yeah so I just talked about Saturn yeah um it’ll be interesting to see how well they do in the montney and the cardium they’ve had some drilling failures in southeast Saskatchewan uh but also a bunch of successes so it’s a new management team they’re not really oil guys so yeah we’ll see how they do I’ve um you know I think the market is fully willing to give them a shot given that they already trade at a discount so I mean you know give it a shot and if you can prove it then the market will uh respect that and value you at a higher valuation uh the one thing to note is that the June warrants likely are going to expire worthless so it takes out a lot of the big headwind uh in terms of dilution that this stock had uh on its head especially with the increased share uh share count now after this transaction uh what are you seeing in oil service market trends so rig rates keep going up equipment rates keep going up labor pricing keeps going up our service companies that capturing that extra margin I don’t know and that’s why I don’t invest in Services um the easiest services companies to evaluate are offshore oil fillers because they tell you we have a contract at this price for this many years and you can literally run that number for all their drill ships and Rigs and then say okay well they don’t really have that much cost like like the cost is already at some cost to build the thing and um and yeah and now that it’s built the operating cost is relatively lower um compared to let’s say the margin on a onshore driller or a fracker where it’s very difficult to know what the internal cost structure of the service company is quarter to quarter and and how it goes up and down it’s it’s very difficult to model um that so I’ve generally been staying away uh from that um so any news on PPR so I’m on a restriction with PPR right now I’m evaluating an asset um in the data room so I can speak on PPR unfortunately um at the moment um what monthly producers are you in so so for me I a I like true energy because crew energy has the best reserves the best undeveloped land acreage uh some of the best gas up like gas plus oil um optionality they have power and they have ground Birch Pure Gas pure oil and then they have everything in the middle they have a huge manias acreage uh that’s that’s yet to be sort of delineated they have one of the best management teams they have the best board of directors uh in the montney and uh they trade at a relatively low multiple they maintain a bit of debt which I like it’s turned out to 2024 and um yeah if if anybody can make a case why I should be in a different monthly name on all yours um yeah I saw some Journey I I don’t really have any thoughts um I like the fact that they’re expanding their power gen it’s a really really good idea uh the Alberta gas market has gone completely messed up um the Alberta electricity Market has got completely messed up because they shut off too much coal too fast and so when the load gets higher the power price just spikes they don’t even have the coal plants now to like start up in case of emergencies because they literally demolish them or converted them to to um to gas turbines so I I really like what uh what Alex and team are doing there they have the water floods uh of course going and they’ve recently drilled some pretty good Wells so uh hey you know I like I like those kinds of management teams that just get it they’re willing to put their own net worth on the line and they understand the engineering and the geologic upside of these um long life low decline reservoirs uh did you comment on search uh I don’t really have anything to comment I did a technical update in November that covered a lot of things and my latest uh sort of comments and yeah I still got my position and nothing really it’s gonna take a catastrophic thing for me to sell my search at this point because the they trade solo on a free cash flow multiple and then on a net asset Value Plus undeveloped land multiple they trade really low they build the best wealth in southeast Saskatchewan they are drilling monster Wells into Sparky and they’re now capitalizing their mountbastian acreage up in EV red Earth uh which they pay 320 million dollars for this in 2018 so there’s something there which is a lot of upside a lot of Running Room a lot of um uh water flood upside and then along with other polymer floods or or other sort of floods and the developing Clear Water Area so uh who knows maybe maybe worth uh you know three or four exploratory drills uh over there not not right in their acreage possibly but but very close to it and it can become a sort of a blending skid area [Music] um yeah the Vermillion options I mean they did end up as profitable as I could have sold them at um they were up like 7x in whatever Vermillion was 37 38 bucks they were up 7x both of them and I ended up selling one up like 50 or some percent and the one was up 200 percent I think um so so definitely did capture as much upside as I should have but um you know this is what I mean about long-term investing and getting into things that just don’t make sense cheaply it’s hard to go wrong like the the downside on them is relatively low uh and you know like everything that went that could have gone wrong with with Vermillion went wrong from September to December everything went wrong and still ended up on a you know with with really good gains on those options so um yeah I feel the same about about Junior companies and everything else is just like buy things cheap and the macro the macro doesn’t have to even work out it just has to not completely collapse and uh over over a longer time frame the Investments are going to work out really well and they’re definitely going to outperform against um their peers and they can outperform but it’s not even a question they can absolutely destroy everything else in the broad market so um again that’s my my view uh was there any update on westcan so I shared my thoughts on the Twitter thread that I put out um when was that yesterday or two days ago and that’s kind of the latest I have I am still looking to do a kind of a full analysis on the well figure out what exactly happened here um my belief is that drilling right on top of the existing fractwell was probably the reason why we’re having a lower uh oil rate the water rate has always been high the Rex Wells that was contract both have 75 water costs so nothing new there um but the oil rate is lower definitely and we’re going to see how it stabilizes here as things go on um when you leave multilateral Wells shut in especially right on top of a frock that it could have communicated with um you know there there’s just too much unknown right now um as I’ve said management is is absolutely atrocious uh giving out the proper information so uh yeah I’m gonna do a post-mortem sort of analysis on the well and then figure out where kind of where where we proceed from there at this point okay I think we’re like more than three hours in so I might uh cut this out of these questions so do you have opinions on Obe and cpg I like obsidian I really like obsidian it is a got lots of optionality it’s got lots of tax pools it’s got uh upside on the blue sky Clearwater acreage and they’ve got financial leverage on that and they’re growing I mean what else could describe a perfect pick in a bullish structural oil Market that’s that’s exactly what you want heavy heavy oil High net box good oil weighting and uh yeah name that I continue to hold and I bought options on this in my personal portfolio update uh as of um two weeks ago or so so yeah Crescent point I don’t I don’t really have much to add um not sure I’m really on board with how how aggressive they’re going in the dubernet it’s pretty hard to make money in the Dubai and the well costs are skyrocketing so ah if Crescent Point didn’t have to do Renee and they were trading at like a similar multiple I would be quite interested uh but but given where they are given what they paid for for Paramount’s kubernet acreage uh not not a huge fan of getting into Shirley plays like that that have a 90 year one decline uh yeah 80 to 90 it’s it’s tough to get out of your own hamster wheel doing that yeah I don’t invest in any oil field Technologies I’ll just be honest like uh because I used to run run these Technologies I used to myself use them on my fields and 95 of of them are snake oil they don’t work um and the other five percent that actually work never get the approval from management to actually install them so yeah the oil field moves very very slowly um in terms of like the Legacy assets and getting them up to speed on new assets they move very fast they’re using state-of-the-art Automation and Technology but on Legacy assets um very very very slow procedures so I’ve mostly been out of that but uh I appreciate the uh the information there uh no no updates on Avila that was always going to be a two to three year story I was hoping they’d get the Northeast BC gas up by now but they haven’t so honestly still waiting nothing nothing of substance to report uh coelacans nothing much report there either it’s it’s again a two to three year story like by looking at one world result is not going to give you anything because the company is already valued very richly as if they’re gonna go and grow much higher so I’m not not much to share there uh I don’t think rebellious gonna buy coelacanth right away they’re going to wait for them to delineate it and do some work build some plants because Vermillion has their own acreage like why why go in there but but they’ve definitely taken a big stab at it with 60 something million shares so that nobody else can come in and buy it uh when the time comes foreign yeah I did sell my ROK I Rock Resources around uh I think I sold half around 50 cents and I sold half around 44 uh cents so um it did its job very very well great management team phenomenal um but I did its job I needed a a junior that could hedge me through June to December and it did exactly that and now I don’t like the hedges going forward um and I don’t I don’t like companies are going to be doing lots of Acquisitions so I got out yes but phenomenal management team and lots of upside uh in in that name for sure um and still very undervalued kind of versus its peers even those had a run it’s not really trading all that expensive uh yeah and that’s even with the warrants all being exercised yeah still still waiting on Meg like nothing I don’t think anything is imminent I still think it gets taken out yes uh at what point not entirely sure um one of the things that I recently learned about Meg was that they actually had reserves booked for sermont and those got taken away uh I think it’s after five years reserves get taken away if you don’t develop that acreage so there’s an extra I think 500 million barrels or something of reserves that got taken away uh from ceremon so I so that’s a possibility if uh call it you know another major or even conical Phillips wants to go in and and really buy out that entire sermon package uh possibly is it gonna happen right now no um probably still quite a bit out that being said Meg is at its 50 free cash flow to share BuyBacks uh time and if oil prices let’s say are in the hundred dollar range uh this year by the end of this year call it early Q4 they will be at 100 free cash flow to BuyBacks so a company that’s buying back three to four percent of their float every month of course they’re going to run into TSX problems in terms of what they can buy but you get where I’m going with this is the share price has this really strong Tailwind to it and um Meg has a lot of strong shareholders makes shareholders are very strong 50 60 70 of the companies tied up so as you keep buying back uh shares on the open market you kind of get rid of the Traders and the short-term holders and eventually people just want more money for this thing I mean Meg was trading at 40 something dollars and twenty 2014 I think I want to say so now that they’ve paid back all the debt why would somebody sell it for 22 bucks like um it just doesn’t make sense people who have been with the story for for 10 years are now going to wait they’re going to wait for 50 60 70 a share and if somebody can make a stab at buying it out before it gets there you know how about it um if they don’t the the share BuyBacks will do the trick in terms of bringing the true valuation uh out on this company yeah I like camera the Clearwater water floods are not being taken into account yet they are bringing out really good results uh in some cases the Clearwater water floods are bringing production back above the ip30 so um and Tamarac has a lot of acreage there that’s underwater flood or couldn’t be put under water flood so um yeah I’m I’m going to continue to hold my position they’re drilling pretty good stuff in the Charlie Lake and um yeah I I’d rather have my clear water exposure with a company that’s trading cheaper and has a bit of Runway to grow as well so yeah it’s gonna stay there that like those names are going to stay there for for quite a while like there’s a reason I picked my top five as far as um call it anchoring my margin portfolio too there’s a reason I picked them low decline names with lots of conventional production with lots of growth upside with lots of tax pools with a bit of financial leverage and very little hedging um all five of the of my top names meet that criteria and uh tamarack’s definitely in that uh could you comment that Razer if oil remains under 90. um nothing really to comment uh it all stays under 90. it’s gonna underperform versus its peers if oil goes above 90 um the peers are not even going to be in the rear view mirror kind of thing so that’s that’s really that’s really what what it is uh there’s there’s no need to really complicate it and uh if if the company survived in 2017 2018 2019 2020 2021 and you’re going to tell me that now it’s going to go bankrupt all of a sudden like what what exactly ground Are you standing on because if the company survived in a 50 60 environment it it survived 2020. why would it all sudden go under right now right so so a bit of the hyperboles around these Junior names um I get quite frustrated but uh I continue to buy so I mean if you think there’s there’s significant risk here then there’s various other companies in the oil patch you you don’t have to buy these kinds of companies but um yeah like I said my view on oil prices is is quite aggressive and I like companies with huge original oil in place that can now be recovered with with methods that have been invented or or perfected in the last 10 years so that that’s all I’ll say on that uh yeah there’s no dry gas Zone in arcs catwa Anchorage but they still continue to drill good Wells it’s just the wells are not going to be as good as they were so um yeah the capital is still one of the top acreages in the modney if not the top um little little pool there if you will so yeah and once they decline they just decline like look at the Eagle Ford look at the bargain and run the the production curve on it that’s exactly what’s going to happen to kagwa that’s exactly what’s going to happen to the montney but it just depends the shape of the curve is it going to be that curve that I showed on the Barnett Shield uh or it’s going to be the curve that hammer had put out where they maintained 30 years at 60 000 boes so that’s really all that matters uh Synovus huge free cash flow should be coming um yeah I haven’t really been following Synovus that much but yeah I think they’re they’re kind of getting there at this point yeah don’t change their debt Target moving goal posts again so oh yeah just be careful of that um yeah once again I already I already spoke about paradaid not not much to say it’s it’s a very high highly financially leveraged name so please do your due diligence on that one for sure uh yeah I’ve got a presentation on that as well why are you avoiding Vermillion I’m I’m not avoiding Vermilion I’m actively looking at the options they are too expensive at this point for me to enter them the equity itself uh although I would like to enter the equity and I am looking at uh ways to enter the equity it’s very difficult to make it fit in a margin portfolio because of the intraday and intra month volatility on it is just insane so it’s still going to end up in my portfolio I think at some point here at this year sooner than later but at the same time it’s kind of got to be structured a certain way where it’s either going to be smaller position on Equity at which point it doesn’t even make sense to enter it versus a junior name or I’m gonna have to find a way to kind of hedge myself against the the volatility or I find some really good options that are maybe um more out of the money that I could go into so yeah still still watching yeah latex is doing great I mean the Clearwater is just fantastic for them the p-vine um I worry about the scale they can get to at some point uh will be interesting to see I haven’t heard anything about them water flooding therapy Vines so that’ll be interesting to see uh but people already know that that the p-vine is good so like if they keep drilling 800 Barrel pretty well I don’t think the you know people are really gonna give them way more credit like yeah they might still rewrite the stock a little bit but right now it’s pretty known that that the p-vine is the best Clearwater acreage and there’s enough scale there to get production up uh significantly for sure um but yeah thanks for asking and with that I think uh that’s all we have so once again I really appreciate everybody’s time joining in joining us here in 2023 as we restart these sessions I got the macro update coming in next week it’s going to be a short macro update so not not the fully long ones and then we’re gonna really talk about a U.S Shale so Company by company I will show you acreage by acreage uh which companies have maxed out which companies are going to start declining there are companies that have drilled so much of their acreage that they can’t even maintain their current rate of production so there are companies that will decline um and uh are into like their tier three tier four infill drilling stuff uh so we’ll talk about that and then February uh fifth I am going to be doing like a uh Investment Portfolio overview update um uh not update like a review of 2022 transactions so look forward to kind of sharing that some of the things that went right some of the things that went wrong uh how I’ve adjusted my models and my mentality here uh to try and take advantage of the cycle and uh yeah we’ll just uh keep on keeping on the recording will be uh on here in a few hours and once again if you would like to join the mailing list where I send the zoom links uh my email is right here uh on this page or shoot me a DM on Twitter as well uh still kind of catching up on on some of the messages so uh yeah well hope everybody has a great rest of the weekend whatever’s left here and we will see you on Twitter space around the markets here uh or next weekend uh cheers

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