BPI Energy (BPG), This is not a report, and it's unlikely to turn into one given its very small size -- but here's a quick run through. It's a snapshot done at the request of a reader. While interesting, I personally don't need any more single digit midgets in the portfolio right now. Still it is a grower and apparently well run. Here's my 15-minute look from the Howard Weil conference:
A tiny (<>
This is not your father's CBM [coalbed methane] play. Forget what you know about production rates in the Rockies. This is generally thinner coal, with lower saturation per ton. As dewatering occurs, production typically climbs to ~80 over 18 months, drops to 60 by year 4, and tails out over 20 years. Not exciting, but if you drill enough wells, you've got a nice, low cost, long-reserve life annuity.
• 50 well program in 2H07. When this was announced the stock shot up from $0.60 to $0.90, but has since given back most of that.
• Management includes former Chief Engineer of Burlington Resources Inc. (BR), who has undoubtedly got lots of CBM experience with BR's huge program in the San Juan Basin. Field ops guy is from Halliburton Co.'s (HAL) CBM Solutions Team... not too shabby.
• Technical: 2 more seasoned staff from BR and 2 from Energen
Areas of Operations:
- Southern Illinois, Delta project: single seam wells. 100% WI and NRI, 86 wells onstream -- ~ 700 Mcfgpd and 3,500 bpd of water. Four productive horizons present. First well was drilled back in 2003, and the first pilot took place 2005, so I'd bet that their first 10 wells or so make up a vast majority of production here, and that the rest will begin to make their presence felt over the next 12 to 24 months.
- Northern (Shelby) project: Multi seam wells. 10 wells onstream, flaring. 2 more awaiting completion. 20 Mcfgpd and 1,000 bpd water. Has some nitrogen, but it doesn't sound like a problem. The company appears to be getting bottom hole pressures down well, which takes time and as that occurs, production will climb.
- Macoupin (additional Northern Basin potential): 4/07 -- begin 10 well pilot.
LOE -- probably pretty darn low.
F&D -- very shallow, 500 feet, <$200K to drill and just under 0.2 Bcfe reserves per well yield very attractive finding costs.
llinois is criss-crossed with infrastructure and has a good local market. Gas here trades at a premium to Henry Hub and Rockies.
