December 31st Reserves
Netherland, Sewell & Associates, Inc. has completed its report estimating Samson’s oil and gas reserves as of December 31, 2016:
|OIL MBBL||GAS MMCF||NPV10 MM|
These estimates utilize the NYMEX strip price, adjusted for delivery and quality differentials.
The current estimate of US$103 million in proved reserves can be compared to the June 30, 2016 estimate, adjusted to exclude the North Stockyard field that was sold in November 2016:
|OIL MBBL||GAS MMCF||NPV10 MM|
The decrease from June 30 to December 31 is due to production roll off and the temporary shut in, for various mechanical reasons, of some producing wells. Substantially all of the shut in wells have been returned to production since December 31.
In addition, the proved developed non-producing (PNDP) category has been reduced due to a decision not to reflect the results of potential workovers (such as fresh water clean outs and acid jobs) until all work has been completed.
The proved undeveloped (PUD) category has seen an increase because of increased oil prices.
The estimate uses variables particular to each well, based on historical data. For Samson’s recently acquired Foreman Butte project, which constitutes the bulk of the reserves, the variables generally adhere to the following parameters:
a) A PUD well cost at $2.8 million.
b) The PUD wells use a type curve that generates an average EUR of 380,000 bbls.
c) A realized oil price differential of $6.61 to WTI.
d) A fixed operating cost of $3,400 per month per well.
e) A salt water disposal cost of $1.50 per barrel
f) Negligible value attributed to gas sales.
The oil price used as December 31st compared to that used in the June 30th estimate is as follows:
June 30th Oil Price
December 31st Oil Price
Samson is seeing increased competition in the provision of oil marketing services due to expected additional pipeline capacity in the Williston Basin. The December 31st 2016 estimate utilizes the prior 12 months average, which is around $6.50 per barrel. We are currently seeing contracts being offered that are closer to $5 a barrel, which may be reflected in future estimates, positively affecting reserve value.
The current estimate reflects an increase in our production costs based on the actual field experience since taking over operatorship in May and June of 2016. Management is concentrating its efforts on actively reducing these costs, which are dominated by salt water disposal fees. Management presently expects to reduce production costs in the near future by achieving greater efficiencies in salt water disposal.
Samson has conducted a project wide fluid level study with the aim of that study to determine whether the existing pump configuration is maximizing the drawdown pressure on the reservoir. As a result of this study Samson has selected 10 priority wells where adjustments will be made to stroke length, stroke rate or pump diameter. It is expected that an additional 350 BOPD of production would be realized from this activity. If achieved, this would result in a higher PDP reserve value in the future.
Infill Development Planning
In order to achieve a cost effective way of developing the proved undeveloped acreage in the Foreman Butte Field, Samson has designed a drilling method for its first Ratcliffe Formation PUD by drilling a new deviated well bore from an existing zero value well. This operation is expected to commence in the spring and will involve a work over rig using slim hole directional drilling tools from the casing shoe of the existing wellbore. It is expected to cost around $375,000 per lateral.
Current planning includes a second lateral, being drilled into the underlying Nesson Formation which has proven productive in an offsetting well. This operation will then be able to use existing surface facilities. The total cost of both short laterals (5,000 feet) estimated at $750,000 is competitive compared to a new well cost of around $2.8 million.
Well recompletions scheduled for this Spring to test behind-pipe pay zones include the Davidson 1, the Karst 13-5, and USA Salsbury D-20 wells.
In the Davidson 1 well approximately 34’ of perforations will be added to the Ratcliffe Formation after isolating the depleted Nesson interval of the Mission Canyon Formation. A success in the Davidson 1 well recompletion could potentially prove up a new oil field in the Ratcliffe Formation.
In the Karst 13-5 well, perforations will be added in Ratcliffe interval where 27’ of net pay has been identified through log analysis. This well is currently shut-in and was a poor producer in the Nesson.
The USA Salsbury D-20 is currently a shut-in well that previously produced from the Red River Formation. The well will test the uphole behind-pipe pay in the Ratcliffe Formation where approximately 25’ of net pay has been identified on the electric logs.
These operations continue Samson’s operational philosophy of bringing on additional production in the most cost effective manner available.
Samson’s Ordinary Shares are traded on the Australian Securities Exchange under the symbol “SSN”. Samson’s American Depository Shares (ADSs) are traded on the New York Stock Exchange MKT under the symbol “SSN”. Each ADS represents 200 fully paid Ordinary Shares of Samson. Samson has a total of 3,282 million ordinary shares issued and outstanding (including 230 million options exercisable at AUD 3.8 cents), which would be the equivalent of 16.41 million ADSs. Accordingly, based on the NYSE MKT closing price of US$0.57 per ADS on February 15th, 2017, the Company has a current market capitalization of approximately US$9.4 million (the options have been valued at an exchange rate of 0.77). Correspondingly, based on the ASX closing price of A$0.004 for ordinary shares and a closing price of A$0.001 for the 2017 options, on February 15th, 2017, the Company has a current market capitalization of approximately A$13.1 million.