Synergy Resources Corporation presents at EnerCom’s The Oil & Gas Conference®
During Synergy Resources’ breakout sessions, management was asked the following questions:
- How do feel about the current price of oil? How sturdy is CAPEX, what will you change if the price goes down?
- Would it be correct that there will be some elasticity to the capital plan that you will present in the next few months?
- Can you speak more to the midstream issues in the basin?
- Are you actively seeking relief on Grand Mesa commitments, and is that changing after the Noble acquisition?
- We are hearing of higher profit volumes? Are you expecting to change any of that on the Evans pad?
- Now that we are a week past the ballot initiative; what are the results and how do you feel about them?
You can listen to Synergy’s presentation by clicking here.
For the company’s second quarter results, click here.
Synergy Resources Corporation (ticker: SYRG) is a domestic oil and natural gas exploration and production company operating in the Denver-Julesburg Basin of Northern Colorado.
All production to date comes from 86 gross horizontal wells and ownership interest in 409 net producing wells on 69,300 net acres in the Wattenberg fairway area and 52,000 acres in the Northeast Extension Area.
Synergy brought in Lynn Peterson as CEO in Dec. 2015. Peterson was former CEO of Kodiak Oil & Gas which was acquired by Whiting Petroleum (ticker: WLL) in a $6 billion deal which was closed in Dec. 2014.
Oil & Gas 360® interviewed Peterson at the Synergy Denver headquarters in February, when oil was below $30 per barrel. Peterson talked about the goal of growing the company’s footprint of contiguous acreage in the Wattenberg.
“We’re looking for opportunity. Growing organically is very difficult at these prices. You can look at the margins, and with that breeds opportunity. All players are not going to live through this. One thing we’re really trying to do is build contiguous blocks of acreage. If you look at our footprint, it’s a little bit scattered. The team has really worked on that, before I came on too, but we are moving forward in that direction—swapping, trading, whatever we have to do to get a more contiguous acreage position.”
Synergy has consummated three acquisitions in the past year that have added to the company’s Wattenberg position. On Feb 18, 2015, the company announced an agreement with Vecta Oil & Gas to increase its working interest covering approximately 10,000 net acres for $250 per acre. Synergy announced the acquisition of leasehold rights for 4,300 net acres in the Wattenberg Field and non-operated working interests in 25 gross (approximately 5 net) horizontal wells in the Niobrara and Codell formations. The acquisition was announced on September 15, 2015, for $78 million, comprised of $35 million in cash and approximately 4.4 million shares of Synergy common stock. Most recently, on May 3, 2016, the company announced the purchase of 33,100 net acres in Weld County, Colo., for $505 million cash.
Raising Capital
Financing for the acquisitions came largely from equity raises done by Synergy. Since January 2015, the company has engaged in four equity raises, three of them in 2016. On January 28, 2015, the company raised net proceeds of $190.7 million by issuing 18,6 million shares. In 2016, the company has raised three round of equity:
- January 21, 16.1 million shares issued for proceeds of $89.1 million
- April 11, 22.4 million shares issued for proceeds of $164.8 million
- May 4, 45.0 million shares issued for proceeds of $251.8 million
In total, the four equity raises amounted to 102.1 million shares issued for proceeds of $696.4 million. This keeps Synergy’s low debt levels intact and doesn’t raise the burden of increasing leverage. As of first quarter 2016, Synergy had zero long term or short term debt on its balance sheet.
Daily net production in Q1 2016 was 11,510 Boe/d, a 63% increase over the same period a year ago, while annual net production increased 65% to 1,047 MBOE. As of 12/31/2015, the company had 66 MMBoe of estimated proved and producing reserves, consisting of 40% oil and condensate and 60% natural gas.
Average well costs covering drilling and completion costs as well as surface and production facilities were $3.5 million while EURs averaged 670 Mboe per well.
The company currently operates one drilling rig at the Fagerberg pad in Weld County, with completion operations underway at the Vista pad.
The company’s Wattenberg acreage fits well with existing and planned DCP Midstream infrastructure. Takeaway capacity on the White Cliffs and Grand Mesa Pipelines has been secured under long-term contracts. The company is seeking to hedge one half of its forecasted 2017 production with costless collars.
