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Shoal Point Energy Ltd. is a petroleum exploration and development company
Message: Excellent First Well (from Black Gold Letter)
Wording in press releases can give people different impressions. I'm going to cut right to the chase on today's Shoal Point Energy (SHP/SHPNF) and give you my interpretations, which I'm confident are completely accurate. The only reason this news would be disappointing to anyone, is because they don't realize how these wells work. Or, to be fair, because it seemed like we would see flow rates now and know how much oil we have.
Plus the headline of the PR is a bit off in my opinion; "Shoal Point Starts Production Testing". What it SHOULD read is that Shoal Point has begun commercial production from the secondary zone, AND further testing on the primary zone. There are half a dozen "zones" beneath the earth in this area of Kansas that have the potential to produce oil/gas. There are 2-3 that have the best chance and most historical success of producing commercially viable oil.
SHP's operators, Shelby Resources, has been doing this for 20 years together, as a team and as a private partnership/company. Meaning, they use their own funds to make money as oilmen. They know this area and the process in maximizing production as well as anybody. So, it is clear coming from them that they do this in careful stages to not disrupt the flows from other zones. They do it to maximize flow from each zone, then combine them for the ultimate flows.
I can tell you already the lower/secondary zone "connected to the on site storage tank" is already producing oil at better rates than the entire group expected. BUT, this is not the juiciest area in this formation. The "primary zone" is, and that is what they're working on now. They also meticulously analyze the process to maximize implementation in this formation going forward, so perhaps well #1 takes an extra few weeks or month to give us the full scope.
SHP modeled their success being based on only 100 barrels of oil per day per well. All indications are, well #1 will blow that out significantly. Things can go wrong in the oil business, so variances can occur. But they might have nearly the 100 bbls per day coming from the secondary zone already! I do not know this for a fact, but I sense that the production isn't dribs and drabs of oil.
If both zones combine flow rates (which also don't start out as a peak.....they grow, then start a decline later for decades) of 150-200 barrels plus per day, we are GOLDEN. But I'm very confident the 100 bbls per day are essentially a lock, otherwise they would not already be planning to drill well #2! Here's the release with a few of my ow highlights.
Bottom line, Shoal Point is a Strong Buy under .25 CDN
SHOAL POINT STARTS PRODUCTION TESTING AT MOUNT EVANS
A secondary zone in Shoal Point Energy Ltd.'s first Mount Evans well has been completed, put on pump and connected to the on-site storage tanks. Production testing of this secondary zone is expected to last approximately 30 to 60 days, after which the higher, primary zone will be completed and put on production and the two zones' production will be commingled.
"This is the start of commercial production from the Mount Evans project," commented Mark Jarvis, chief executive officer of Shoal Point Energy. "Initial results from this secondary zone are encouraging enough to justify an extended period of production testing and oil sales from this single zone to help us to understand our secondary reservoir and quantify what level of production will be sustainable. Although we will delay the start of full, commingled production from both zones, the knowledge we gain will allow us to maximize the sustainable production from this well."
Based on the success of the first well in the Mount Evans project, planning is underway for the second well, expected to start drilling in the last week of March.
Back to Eric: at this pace, we could have 5 wells producing by early fall. Even at the modest 100 bbls per day average projections, the cash flows/earnings could justify a $1-2-3 share price in SHP going into 2021. Stay the long game here folks, as long as its working. You don't get rich flipping around different stocks like a piker. You get rich by building long term positions in solid companies that grow. Sell a little if it gets way ahead of itself, buy more if it fluctuates too low, and keep a core position on NO MATTER WHAT (as long as execution is generally on track).
Imagine the emotional roller coaster holding Ultra Petroleum from 30 cents to $150 per share?! I wonder how many people held on the whole way. Actually, I don't wonder. At best, maybe 5-10 now VERY rich people.
Lastly, if things weren't looking good for this first well (always the riskiest when starting a new area, new partnership etc), I would just flippin say so! To the contrary, I'm very excited about how things are going so far.
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Sincerely,
Eric Muschinski
Black Gold Letter
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Legal Disclaimer: I am offering ideas for your consideration and education. I am not offering financial advice. I am not a financial or investment advisor and am acting in the sole capacity of a newsletter writer. I am a fellow investor and trader sharing his thoughts for educational and informational purposes only. *Shoal Point Energy is an advertiser with BGL so do your own research before acting on anything that I say. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided on the Website is based on careful research and sources that are believed to be accurate, Mr. Muschinski does not guarantee the accuracy or thoroughness of the data or information reported. The opinions published on the Website belong to Mr. Muschinski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Muschinski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published on the Website have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Muschinski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Muschinski, Gold Investment Letter's employees and affiliates, as well as members of their families, may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
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