Thursday, April 28, 2016

Cub Energy gives operational update

Link:

Average production for the first quarter was approximately 1,644 barrels of oil equivalent (“boe/d”) (Cub WI), which was a 22% increase over fourth quarter production of 1,353 boe/d. The majority of the increased production in the first quarter came from Tysagaz due to successful workovers on the RK-23 and RK-21 wells late in 2015 and early 2016 respectively. Tysagaz’s production volumes increased to 431 boe/d during the first quarter of 2016 as compared to 200 boe/d during the fourth quarter of 2015.


The estimated natural gas price received in Ukraine during the first quarter of 2016 was $6.23 per thousand cubic feet (“Mcf”) as compared $7.23/Mcf in the fourth quarter of 2015. Cub is paid in hryvnia (“UAH”), so the realized price in USD will continue to be influenced by changes in the exchange rate. The exchange rate went from 24.2 UAH/USD at the end of the fourth quarter of 2015 to 26.3 UAH/USD at the end of the first quarter of 2016 for an approximate 8% devaluation.

It is interesting to note that since the second quarter has started the Ukranian Hyrvnia has actually strengthened to 25.1 UAH/USD and is trending in the right direction. This is a highly speculative company but several years ago the management demonstrated  that they could consistently grow production and cashflow. It was only when the government of Ukraine stupidly jacked up the royalty rates that the company saw production shrink. Production has now begun increasing, the currency is strengthening, and the government, forced by necessity, is making market based changes that the IMF is demanding so that Ukraine can get the loans it needs to keep from defaulting. It is interesting to note that a couple of years ago this stock traded at over $.40 per share. 


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