Analysis of Q3 Results for Junior Oil and Gas Companies on the TSX: Part One

As Q3 numbers have now been released, I will now analyze of the Q3 results for Junior and Intermediate Oil and Gas companies that are TSX listed and producing predominantly in the Western Canadian Basin.

In this post I will focus on the Junior Oil and Gas companies, which means companies with production between 500 and 10,000 barrels of oil equivalent per day (BOED). Most of this information comes from the Brian Mills Iradesso Quarterly Report. You can find access to this report here. This is an excellent free report that provides comparisons on key metrics of oil and gas companies.

There are 54 companies that fit the Junior classification and they have production between 517 BOED and 9,907 BOED.

Here are the averages:

Productions: 2,690 BOED

% Gas: 66%

Market Cap per BOED: $63,446

Netback: $9.99/BOE

Operating Expense: $12.60/BOE

General and Administrative Expense: $5.23/BOE

Depletion, Depreciation and Amortization Expense: $27.09/BOE

Royalty Expense: $5.02/BOE

Op Ex + G&A + DD&A + Royalty Expenses: $49.95/BOE

Sell Price: $34.66/BOE

The main point to look at here is that the expenses are higher than the sell price (or revenue per BOE) by $15.29/BOE. Not a great place to be in. In my opinion, the junior oil and gas companies have to look at ways to reduce the costs that they can, such as Operating expenses, G&A costs and DD&A costs. I have excluded interest costs in this analysis.

Since the biggest costs are DD&A costs, oil and gas companies should find ways to reduce these costs per BOE. DD&A costs are costs that are associated with adding reserves to an oil and gas company. One of the easiest ways that reducing DD&A costs can be accomplished is by buying existing reserves for less than the companies current DD&A costs/BOE. Since the average DD&A cost is $27.09/BOE and the average Reserve life Index is 10.4 years, then the cost to replace one Barrel of Oil Equivalent per Day (BOED) is $102,833. All you have to do is find a way to purchase pre-existing production for less then that (give it has 10.4 years as a RLI) and you will reduce your DD&A costs. This is marginalizing the acquisition process, but it is for illustrative purposes.

Another way to reduce DD&A costs is to identify reserves that are missing on the reserves report, which Argentis Group can help with with a service we offer. With this service, a company can add reserves for as little as $.05 per BOE as opposed to the industry average of $16 per BOE for Find and Develop (F&D) costs for oil and gas.

Another way of looking at how to reduce the DD&A costs would be as follows:

If the average oil and gas company has a daily production of 2690 BOE and has a reserves life index of 10.4 years, then the DD&A costs associated with this company would be $276,622,492. This is derived by 2690 BOED X 10.4 years X 365 Days X $27.09 DD&A costs. By adding 9% reserves that a company does not know about, then your overall DD&A costs for the company have now shrunk on a BOE basis (assume that the cost to add the additional 9% is not included, and this cost is minimal). The new DD&A costs per BOE are $24.85. For the average Oil and Gas company, this would be a reduction of $602,183 per quarter (or $2.4M per year) on DD&A costs, which is amazing.

So the above example is one way to help reduce the costs per BOE. There are others expense reduction strategies that can be look at to reduce the overall costs per BOE. All you have to do is find some more (email me and I can work with you).

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 10 - How will your auditors ensure your Cash Generating Unit’s will be authenticated?

This is the tenth and final question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

How will your auditors ensure your Cash Generating Unit’s will be authenticated?

Believe it or not, there are companies that do not know that they own an oil or gas well(s). This is due to numerous reasons, but suffice to say, without going into detail, it is true.

If you can't authenticate that you own a well, then how would you be able to ensure that your cash generating units are authenticated.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 9 - How can your auditors potentially make your IFRS conversion pay for itself and add asset value to your company?

This is the ninth question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

How can your auditors potentially make your IFRS conversion pay for itself and add asset value to your company?

Most companies look at the transition to IFRS as cost that they have to incur, but there is a potential to increase the value of your oil and gas company, reduce capital expenditures and identify missed revenues that will help pay for the conversation.

For example, Argentis Group has a process that we run in oil and gas companies to identify missed reserves and missed revenue. On average we identify 9% missed on reserves. For the average junior oil and gas company this would be equal to identifying 919,011 barrels of oil equivalent (BOE). This number was derived from using the average barrel of oil equivalent per day (BOED) of Junior oil and gas companies listed on the TSX with production in the Western Canadian Basin, which is 2,690 and multiplying it by the average reserve life index of junior companies of 10.4 year. (2,690 BOED X 10.4 years x 365 days). The average Find and Develop (F&D) cost per BOE in the Western Canadian Basin is $16. So at $16/BOE in F&D costs times 919,011 BOE would be equal to $14,704,176 in find and develop costs.

So by identifying 9% missed reserves, a company has the potential to free up $14.7M in capital that would normally be associated with reserves replacement.

In addition to this, by identifying these missed reserves, a company will now be able to increase net asset value (NAV) by up to $11M. This is calculated by using the same 919,011 BOE and multiplying this by $12/BOE for NAV. $12 is the average NAV per BOE in the Western Canadian Basin.

In addition to increasing NAV and offsetting capital costs associated with reserves replacement, Oil and gas companies should also look for missed royalties or missed working interests. These revenues can also add up to potentially offset IFRS costs.

Argentis Group can help your company in providing a way to pay for your IFRS conversion all while increasing the value at the same time.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 8 - Do your auditors authenticate well counts for Annual Information Form’s?

This is the eighth question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

Do your auditors authenticate well counts for Annual Information Form’s?

A quick definition on the Annual Information Form (AIF):

A source of additional investor information not included in a company’s prospectus or annual financial statements. Required by law and must be given to you free of charge if you request it. From http://www.getsmarteraboutmoney.ca/tools_and_calculators/glossary/definition/Pages/annual-information-form-aif.aspx

Although the Annual Information Form does not have the same impact as a quarterlies and annual financial statements, they are important as this is were a publicly listed oil and gas company show what their reserves are and how many wells they own (among other pieces of information).

We have seen in one instance, where a company had 222 gross wells but only listed 57 in their AIF. In another example, a company that we worked with were out by 16% on their net well count. A couple of mighty big discrepancy. If your auditor can not identify how many wells you own our if they can not assist you with this process, then chances are, as an oil and gas company, you might be incorrectly stating reserves and hence, either overstating or understating your asset value. This has an impact on the depletion, depreciation and amortization (DD&A) costs, which would make them lower.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 7 - How do your auditors tie up reserves to cash generating units?

This is the seventh question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

How do your auditors tie up reserves to cash generating units?

This is important as companies move forward with IFRS. As an oil and gas company, you have to be able to identify where your revenue is coming from at a cash generating unit. Since an oil and gas companies future revenues come from their reserves, if you can not tie reserves to cash generating units, then how do you authenticate revenue?

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company. If you would like to find out how to tie up reserves to a cash generating unit, then please contact us.

Question 6 - How do your auditors authenticate your Asset Retirement Obligation’s and Offset well liabilities?

This is the sixth question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

The question is:

How do your auditors authenticate your Asset Retirement Obligation’s (ARO) and Offset well liabilities?

Let's say an oil and gas company will set aside $50K per well for your asset retirement obligations. For and average Junior Oil and Gas company with production being 2,690 Barrerl of Oil Equivalent per Day (BOED) and the average well producing 30 BOED, then they would have an asset retirement obligation of $4.5M. This is a significant amount. We have seen on different occasions where companies are carrying ARO's on royalty wells (where you shouldn't be). We have also seen where wells that were divested were still being carried as well as ARO's being applied to multiple events on the same well.

As of Offset well liabilities, this is extremely tough to identify. When a company has a lease agreement with a freehold land owner, there is typically a clause in the agreement that states that if a well is drilled within a section or quarter section basis (depending on oil or gas) on the adjoining section/quarter section, this would trigger a drill, drop or compensate mechanism. The leesee has to either drill a well, compensate for drainage or drop the lease. The legality behind this takes too long to go into, but if you want to find out more, I would suggest going to the Freehold Owners Association at www.fhoa.ca. Since an oil an gas company has to look at each freehold lease that they representing for the freehold land owner, it is a very long task to identify any offset well obligations. As an example, say an oil well is drilled on an adjoining quarter section and triggers a potential compensatory royalty. The average oil well produces 40 barrels of oil per day. Say the royalty rate for the freehold land owner is 5% and the average price is $80/barrel. This would mean that the oil and gas company would potentially have to pay the freehold land owner $160/day or $58,400 per year. This is a liability that is carried on the books that is often left un-actioned.

In both cases, more than likely your auditors are not identifying additional ARO's or offset well liabilities, which have impacts on the overall financials of an oil and gas company.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 5 - How Do Your Auditors Validate Your Are Not Overpaying Capital, Operating Expenses or Royalties?

This is the fifth question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

The questions is:

How do your auditors validate that you are not overpaying:

a. Capital?

b. Operating expenses?

c. Royalties?

On the flip side, you could also ask the same question on underpayment.

This is important since all of these can have a positive or negative impact on your overall expenses. Even though your auditors don't have to do a 100% check against all your capital and operating expenditures and your royalty payments, there is still a chance that any errors could have an impact on the financial viability of an oil and gas company. Costs in oil and gas companies can be extremely large and there is potential for error. If your auditor were to take a more through approach to looking at expenses, they might find ways to add to the bottom line.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 4 - How do your auditors validate that you are receiving what is owed to you?

This is the forth question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

The third question(s) is/are:

How do your auditors validate that you are receiving:

a. All revenue due to you?

b. All royalties due to you?

c. All transportation, processing fees and compression fees due to you?

Basically, you should be asking your auditors these questions to ensure that they have a process in place to ensure that you are receiving all that should be owed to you. In most cases, auditors may not have the ability to correlate all the information that is required. This isn't their fault as they may not have the proper tools to do so.

If your auditors were to look at this information, they may be able to identify potential revenues for your company. Then again, they may find areas where you owe money to a partner. We have seen numerous cases where royalties are owed or a working interest isn't being collected.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 3 - How do your auditors validate that your working interests are accurate in all your cost centers?

This is the third question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

The third question is "How do your auditors validate that your working interests are accurate in all your cost centers?"

The importance behind this is to ensure that you are getting the revenue that you are entitled to and paying the expenses that you are suppose to.

Working Interest example:

If you were to take the average oil well which produces 40 barrels of oil a day and look at the forecasted price for oil over the next few years, which is close to $90 per BOE, then the average well would produce $1.3M in revenue per year.

For examples sake, if the working interest is 50% or 50/50 with ABC Co, then your yearly revenue would be $657,000. If, by human error, you were to hit the next digit down on your keyboard, a 4 instead of a 5, you enter your working interest as 40% of the revenue against total production on the well, then the new amount is $525,600 in revenue. That 10% difference in working interest actually has the impact of reducing your revenue by 20% since you would be out $131,400 on $657,000. 20% out on revenue on any well is significant.

29,000 BOED is the average production a TSX listed company with production between 1,000 and 100,000 BOED. Of this 30%,on average, is oil production, or 8,700 BOED. If there were a 10% error rate on the wells and a 10% error rate on the working interests entered (assume entered lower) then this will potentially cost a company $2.9M in revenue per year.

If your auditor is not authenticating your your working interests or royalty rates against their cost centers, then you could potentially be missing revenue.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 2 - Cost Centers to Assets Match - Part of the 10 Questions An Oil and Gas Company Should Ask Their Auditors

This is the second question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

The question was:

How do your auditors tie up every cost center to your assets?

Cost centers allow companies to put the appropriate expenditures against the appropriate budget. This question can probably be best answered by asking a few more questions.

How can you auditors tie up cost centers to assets if they can’t create an authentic asset list or well list?

If your auditor cannot tie up cost centers, then how can they authenticate expenditures?

If you cannot tie up expenditures, then how do you know exactly what your company is spending?

Pretty straight forward, no match to an asset, then there is a possibility that errors can creep in.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

Question 1 - Authenticated Master Well List - Part of the 10 Questions An Oil and Gas Company Should Ask Their Auditors

In my last post, 10 Questions An Oil and Gas Company Should Ask Their Auditors, I listed off 10 questions that Auditors should be asked to get an understanding of how they approach auditing your financials. This is especially critical as TSX listed oil and gas companies are about to start the switch to International Financial Reporting Standards.

In the next few posts, I will look at each question in more detail and the importance behind the question. The first question is:

How do your auditors authenticate your master asset list or well list to ensure accuracy?

This is an important question to ask your auditor, as an oil and gas company’s primary asset typically will be their reserves. Hard to believe, but there are few companies that even have an accurate master wells list. Smaller companies typically do, if they have high ownership and few wells, but Argentis Group had one client with production of about 300 barrels a day who stated that they had 59 gross wells and 56 net wells in their Annual Information Form (AIF) when in fact we uncovered over 200 gross wells and 56 net wells. Of the 56 net wells that they claimed they had, we had 20% different wells then they listed. Another firm that Argentis Group worked with had just gone through a 3-month process of creating a master well list, but we were still able to identify 4% of their wells missing of the newly made master list and 2% of the overall proved reserves missing.

The reason that companies do not have an accurate master well list is that there may be several different departments that keep a well list (no two being the same in most cases) and no true owner of the well list. For example, the Land department and the reserves department may have a list, engineering might have a list and finance might say that their Asset Retirement Obligation (ARO) list might be the well list, but basically, there is no authentic master well list.

In order for an auditor to do their job thoroughly and to have a starting point, they should have a process to look at a master well list with meta data such as working interests, royalty rates, operatorship, etc. I know that in reality the auditor only has to take the information that you provide and authenticate it, but for the fees that they charges, they should at least be able to help with a master well list.

If your auditor doesn’t have a process for assisting you create a master well list, then how do they know that you ARO’s and the wells on the ARO List are accurate. If your auditor doesn’t have or can’t compile a master well list, then they don’t know your reserves and how do they know if all your reserves are being tied up to a cash generating unit?

If you look at a company having an inaccurate master well list, then they are more than likely understating or overstating Depletion, Depreciation and Amortization (DD&A) costs. For example, let’s say that a company has $100 DD&A costs overall and you have 10 BOE as reserves. This translates to $10/BOE in DD&A. If you find 2 more BOE in reserves that you didn’t know you had, then you end up with $8.33/BOE in DD&A, which is derived from $100 (total DD&A costs) divided by 12 BOE (the new amount of reserves). In this case, the oil and gas company is overstating their DD&A costs by 20%. In addition, this company will now be able to increase their Net Asset Value (NAV) by potentially 20% through the additional reserves that were found.

The bottom line is, if your auditors don’t have a master well list or have no way of providing you with a master wells list, then they are doing you a disservice. You should be demanding more from your audit firms and be asking for more rigor in their process. If they can’t provide you with an accurate well list and help boost your overall value of your company, then you should look for a firm that will help you. Argentis Group can help create the accurate well list for your company.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

10 Questions An Oil and Gas Company Should Ask Their Auditors

With the introduction of International Financial Reporting Standards (IFRS) in Canada the financial landscape will be changing for publicly listed companies in January 2011 or just a little over a year. As such, companies would be wise to review not only how they are audited and how they will report, but also who is actually doing their financial audits for them.

Typical audits do have a lot of rigor built into them, but in most cases audit firms will use a spot check analysis (1 in every 5 or 1 in every 10 results for example) to determine if results are correct. Audit firms do this because they do not have the technology to perform a full verification of your financial results.

In fact, if the audit firms were to employ a more thorough approach and check all results, there are opportunities to uncover potential missed revenue and reserves, which would have a tremendous impact on the overall financial health of your company. On average, when my company Argentis Group performs an operational audit on a company, we expect to find 9% out on proved reserves. 9% out on reserves can have a significant impact on DD&A and thus the overall financials of an oil and gas company.

Listed below are ten questions that you should ask your auditor. I will go into more detail as to why you should ask these questions in subsequent posts.

Top 10 Questions An Oil and Gas Company Should Ask Their Auditors

1. How do your auditors authenticate your master asset list or well list to ensure accuracy?

2. How do your auditors tie up every cost center to your assets?

3. How do your auditors validate that your working interests are accurate in all your cost centers?

4. How do your auditors validate that you are receiving:

a. All revenue due to you?

b. All royalties due to you?

c. All transportation, processing fees and compression fees due to you?

5. How do your auditors validate that you are not overpaying:

a. Capital?

b. Operating expenses?

c. Royalties?

6. How do your auditors authenticate your Asset Retirement Obligation’s and Offset well liabilities?

7. How do your auditors tie up reserves to cash generating units?

8. Do your auditors authenticate well counts for Annual Information Form’s?

9. How can your auditors potentially make your IFRS conversion pay for itself and add asset value to your company?

10. How will your auditors ensure your Cash Generating Unit’s will be authenticated?

The numbers for the top 5 audit firms in Calgary are listed below.

Deloitte – 403-267-1700

E&Y – 403-290-4100

KPMG – 403-777-9999

PWC - 403-509-7500

MNP - 403-444-0150

Give your auditor a call and see if they can answer these questions for you. If they can not provide a thorough check against all results then you should ask them how they are going to do this to ensure accuracy as you move towards IFRS.

Argentis Group can perform a full array of operational audits to assist companies in identifying opportunities to help offset the costs of IFRS for oil and gas companies and also allow you to ensure financial accuracy. Typically, we will find enough value for your company to more that offset the costs and to make you transition to IFRS smoother and potentially allow for greater overall financial strength.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

The High Cost of Natural Gas - Potentially Breaking the Bank

I have written quite a bit about natural gas, but I recently found some information that highlights some of the issues facing oil and gas companies who depend on natural gas as part of their business.

Here are some interesting numbers on Natural Gas production in Western Canada:

• Q2 2009 numbers that I have shown in the past show that the average sales price is $6.34/mcf
• The average price for natural gas since 1999 was $5.90/mcf Canadian
• The average price for natural gas since 2006 has been $6.44/mcf Canadian
• The average price for natural gas over the last 12 months has been $4.64/mcf Canadian
• In 2008, the National Energy Board of Canada claimed that the average cost per mcf for companies was $7.63 Canadian
• Intermediate oil companies (between 10,000 and 100,000 BOED) had an average cost of $7.07 Canadian (excluding royalties)
• Juniors (between 500 and 10,000 BOED) had an average cost of $9.27/mcf Canadian (excluding royalties)
• In US dollars the average price of natural gas on the NYMEX was $5.43/mcf and $4.67/mcf on the AECO - This represents a NYMEX premium of 14%
• In US dollars, since 2006, the average price of natural gas on the NYMEX was $6.77/mcf and $5.86/mcf for the AECO - This represents a NYMEX premium of 13%
• In US Dollars, over the last 12 months (Oct 08 to Sept 09), the average price of natural gas on the NYMEX was $4.54/mcf and $3.93/mcf for the AECO - This represents a NYMEX premium of 14%

Below shows a graph of the monthly price of natural gas in Canadian dollars since 1999.

Above shows the price of natural gas since 2006 on a monthly basis in Canadian Dollars.

So no matter how you cut it, Western Canadian Gas is at a significant price and cost disadvantage. If we are pulling a mcf of gas out of the ground for $7.63 on average and we are getting a significantly lower price, $4.64/mcf (based on an average of the last 12 months), then you are losing $2.99/mcf and this isn't much of an economic business model. This example represents a 39% difference in price just to break even.

Over the long term the price of natural gas is, on average, lower than the current costs to extract it. Something has to be done to reduce the cost per mcf as we have very little impact over price of natural gas since it is market driven.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.

No Two Companies are the Same - Cash Flow Analysis on Canadian Oil and Gas Companies

When you look at companies, a typical measure of a companies financial health is done via cash flow. It is basically the incoming cash vs. the outgoing cash or do you have enough cash to pay your bills.

A lot of times, people will look at cash flow per share as a financial benchmark, but in the oil and gas industry, if you use barrels of oil equivalent per day (BOED), or even better barrels of oil equivalent (BOE), then you get a better gauge of a companies overall financial health.

The follow information shows the cash flow per BOED and BOE for some select Junior and Intermediate companies:

Company	Size	Cash Flow	Cash flow/ Share	Cash flow/ BOED	Cash flow Per BOE
CrescentPoint	Intermediate	$137,960,000	$0.92	$3,339	$36.29
ParamountEng	Intermediate	$88,718,000	$0.78	$3,216	$34.96
Freehold	Junior	$21,884,000	$0.44	$3,000	$32.97
West	Junior	$12,063,000	$0.15	$2,948	$32.40
Peyto	Intermediate	$46,063,000	$0.43	$2,562	$27.84
Fairborne	Intermediate	$35,742,000	$0.41	$2,335	$25.38
NAL	Intermediate	$52,972,000	$0.52	$2,298	$24.98
Zargon	Junior	$21,325,000	$0.92	$2,240	$24.62
Baytex	Intermediate	$86,661,000	$0.82	$2,146	$23.32
Enerplus	Intermediate	$199,815,000	$1.18	$2,114	$22.98
Daylight	Intermediate	$48,459,000	$0.45	$2,103	$22.85
Culane	Junior	$3,032,000	$0.13	$2,049	$22.51
Bonterra	Junior	$9,780,000	$0.55	$1,951	$21.43
Bonavista	Intermediate	$101,655,000	$0.85	$1,964	$21.34
Pengrowth	Intermediate	$160,095,000	$0.62	$1,948	$21.18
ARC	Intermediate	$120,500,000	$0.51	$1,884	$20.48
Galleon	Intermediate	$29,605,000	$0.39	$1,842	$20.02
Delphi	Junior	$12,371,000	$0.16	$1,817	$19.97
Arcan	Junior	$2,764,000	$0.07	$1,815	$19.94
Celtic	Intermediate	$20,008,000	$0.46	$1,834	$19.94
Birchcliff	Intermediate	$20,026,000	$0.18	$1,770	$19.24
EagleRock	Junior	$916,000	$0.02	$1,738	$19.10
Fairwest	Junior	$1,388,000	$0.01	$1,716	$18.85
Advantage	Intermediate	$51,590,000	$0.36	$1,662	$18.06
NuVista	Intermediate	$41,779,000	$0.53	$1,621	$17.62
Rock	Junior	$5,195,000	$0.20	$1,561	$17.15
BlackPearl	Junior	$8,013,000	$0.03	$1,550	$17.03
Seaview	Junior	$3,076,000	$0.05	$1,489	$16.36
Stonefire	Junior	$2,037,000	$0.08	$1,488	$16.35
Crew	Intermediate	$20,036,000	$0.27	$1,488	$16.17
Zapata	Junior	$3,853,000	$0.23	$1,461	$16.05
Painted Pony	Junior	$1,826,000	$0.06	$1,391	$15.28
Diaz	Junior	$822,000	$0.01	$1,218	$13.38
NuLoch	Junior	$601,000	$0.02	$1,185	$13.03
Angle	Junior	$8,539,000	$0.21	$1,143	$12.56
Great Plains	Junior	$1,486,000	$0.02	$1,142	$12.55
Open Range	Junior	$2,508,000	$0.09	$1,117	$12.28
TRUE	Junior	$10,765,000	$0.14	$1,102	$12.11
Trilogy	Intermediate	$21,857,000	$0.22	$1,104	$12.00
Breaker	Junior	$7,493,000	$0.16	$1,064	$11.70
Storm	Junior	$8,460,000	$0.18	$1,038	$11.40
Buffalo	Junior	$2,743,000	$0.04	$1,011	$11.11
Cequence	Junior	$1,541,000	$0.04	$995	$10.94
Cinch	Junior	$2,569,000	$0.05	$982	$10.79
Redcliffe	Junior	$747,000	$0.01	$944	$10.38
Twin Butte	Junior	$2,691,000	$0.06	$940	$10.33
Crocotta	Junior	$1,884,000	$0.04	$939	$10.32
Midnight	Junior	$2,054,000	$0.04	$938	$10.31
ProspEx	Junior	$2,864,000	$0.05	$927	$10.19
Wrangler West	Junior	$1,034,000	$0.16	$926	$10.17
Berens	Junior	$3,866,000	$0.04	$925	$10.16
Yoho	Junior	$2,475,000	$0.12	$923	$10.14
Terra	Junior	$4,930,000	$0.07	$911	$10.01
Arsenal	Junior	$2,032,000	$0.02	$909	$9.99
ParamountRes	Intermediate	$12,236,000	$0.19	$916	$9.95
Questerre	Junior	$717,000	$0.004	$890	$9.78
Progress	Intermediate	$29,619,000	$0.18	$876	$9.52
Anderson	Junior	$6,692,000	$0.06	$859	$9.44
Enterra	Intermediate	$8,561,000	$0.14	$851	$9.25
Vero	Junior	$5,767,000	$0.15	$819	$9.00
Petro-Reef	Junior	$619,000	$0.02	$731	$8.03
Ironhorse	Junior	$877,000	$0.04	$717	$7.88
Midway	Junior	$673,000	$0.05	$687	$7.55
Intl Sovereign	Junior	$593,000	$0.04	$622	$6.83
Orleans	Junior	$2,326,000	$0.04	$604	$6.64
Sure	Junior	$372,000	$0.01	$570	$6.26
Bellamont	Junior	$394,000	$0.01	$454	$4.99
Triton	Junior	$420,000	$0.01	$447	$4.92
Fortress	Junior	$557,000	$0.02	$435	$4.79
Compton	Intermediate	$9,214,000	$0.07	$430	$4.67
Twoco	Junior	$511,000	$0.03	$403	$4.43
Monterey	Junior	$844,000	$0.03	$362	$3.98
Insignia	Junior	$273,000	$0.02	$353	$3.88
Canext	Junior	$347,000	$0.004	$349	$3.83
Iteration	Intermediate	$5,464,000	$0.03	$319	$3.47
DeeThree	Junior	$95,000	$0.01	$176	$1.93
Canadian Phoenix	Junior	$149,000	$0.0001	$169	$1.86
Argosy	Junior	$78,000	$0.01	$83	$0.92
Second Wave	Junior	$(26,000)	$(0.001)	$(26)	$(0.29)
Result	Junior	$(32,000)	$(0.0004)	$(52)	$(0.57)
Dejour	Junior	$(243,000)	$(0.003)	$(439)	$(4.82)
One	Junior	$(355,000)	$(0.01)	$(529)	$(5.81)
Action	Junior	$(855,000)	$(0.01)	$(880)	$(9.67)
Average		$18,687,410	$0.19	$1,180	$12.91

If you look at the low end of the cash flow per BOE, you will notice that one company, Action Energy, has been put into CCAA and most of their assets have been sold off and Result Energy was just recapitalized taken over by the former management team of Tristar Oil and Gas (watch Result Energy, this team has done wonders in the past).

On the upper end, it is good to see that there is a mix of intermediates and juniors, but heavily weighted to the intermediates. Towards the lower end, you see mostly the juniors.

It looks as if a lot of these companies still have pretty decent cash flow, even if we are in a period where gas prices are low. In the long run though, companies are going to have to look at ways to reduce their operating costs, particularly on the natural gas side of their business, to keep their cash flow strong.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company