Samson Oil & Gas Limited (ASX:SSN; NYSE MKT:SSN):
Hedging
In conjunction with the extension of Samson’s current credit facility to
fund the Foreman Butte acquisition, Samson has entered into new hedging
arrangements. Approximately 75% of total current production including
the acquisition has been hedged from May 2016 to April 2018. Additional
hedges will be put in place as production increases. The counter party
to the hedges is BP, Samson’s previous hedge counter party.
The hedges, detailed below, were put in place on March 30, 2016. Samson
has deferred premiums of $0.5 million with respect to this hedge
program. The net value, after deferred premiums of the hedge portfolio
at April 4, 2016, was approximately $0.8 million.
Collars
Product
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Start Date
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End Date
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Volume
(BO/Mmbtu)
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Floor
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Ceiling
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WTI
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1-May-16
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30-Apr-18
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147,462
|
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41.50
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|
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63.00
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Henry Hub
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1-May-16
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31-Oct-16
|
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192,029
|
|
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1.90
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|
|
|
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2.40
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Henry Hub
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1-Nov-16
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|
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31-Mar-17
|
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134,088
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2.60
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3.35
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Henry Hub
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1-Apr-17
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31-Oct-17
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167,682
|
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2.40
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|
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2.91
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Henry Hub
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1-Nov-17
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30-Apr-18
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127,030
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2.80
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3.60
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Costless Swaps
Product
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Start
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End
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Volume (BO)
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Swap
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WTI
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1-May-16
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|
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31-Dec-16
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113,925
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|
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41.20
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WTI
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1-Jan-17
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31-Dec-17
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141,255
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44.09
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WTI
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1-Jan-18
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|
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30-Apr-18
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39,720
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45.55
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The hedge program was designed to protect the acquisition price of the
Foreman Butte project and has a floor of around $41 per barrel.
Together with the Company’s hedging advisors, Samson will continue to
monitor the oil markets with a view to trading out of these hedge
positions or reducing the deferred premiums as the market dictates
Foreman Butte Project Operations Program
Samson has submitted the transfer of operator forms to the regulatory
agencies in the states of Montana (MBOGC) and North Dakota (NDIC) for
approval of the newly acquired assets. Following receipt of these
approvals, Samson will embark on a development program that will bring
29 inactive wells that are expected to be economic even at current
prices back to producing status. This program can be put into three
different categories:
Round 1: Workover shut-in wells with mechanical problems:
Of the 29 inactive and currently economic wells acquired, 11 wells have
been selected for the initial round of mechanical workovers. These are
wells that have been shut-in for various mechanical reasons, including
parted rod strings, a stuck pump, or a tubing leak. The investment
necessary to bring these wells back online is expected to be modest,
estimated at between $15,000 and $25,000 per well. The expected first
month’s production from these wells is estimated to be around 200 BOPD
from these 11 wells without any stimulation beyond that encompassed in
the mechanical workovers, namely a regular acid stimulation.
The acid stimulation is aimed at cleaning the perforation tunnels and
near well bore restrictions to maximize oil flow. An increase in
production would be expected from this type of operation; however, no
additional uplift has been factored into the 200 BOPD production
expected from the mechanical workovers.
Round 2: Workover shut-in horizontal wells with advanced stimulation
potential:
There are 18 wells in this category, which have been identified based on
their individual production history, the structural position of the well
in the field, and the porosity trends across the field. These wells have
been examined by our reserve auditor and have been assigned a 4 times
uplift in production from the previous shut-in rate shown in our current
reserve report. This uplift was developed using data from immediately
adjacent (but outside our project area) well bore treatments. The 18
wells could collectively add an additional 1,400 BOPD to the project in
the first month following the treatment. The treatment for these wells
is being designed by a leading oil service provider using
state-of-the-art reactive fluids and diversion material. Total
expenditure associated with this operation is expected to be around
$100,000-$150,000 per well.
These first two initial workover programs are expected to substantially
increase the acquisition assets production rate.
Round 3: Proved undeveloped drilling
Samson has identified a total of 37 infill well locations that could be
drilled. The majority of these 37 infill wells' locations are extended
laterals. Only 13 of these are included in our current reserve report
due to capital constraints imposed on that estimate. These wells are
expected to cost $2.8 million and are economic in the current pricing
environment. They are, however, a third ranked investment priority as
the capital efficiency associated with the initial and second round
workover programs is superior to drilling wells in the current price
environment. All drilling locations are within the boundaries of the
various fields acquired and are immediately adjacent to existing
production.
Samson’s Ordinary Shares are traded on the Australian Securities
Exchange under the symbol "SSN". Samson's American Depository Shares
(ADSs) are traded on the New York Stock Exchange MKT under the symbol
"SSN". Each ADS represents 200 fully paid Ordinary Shares of Samson.
Samson has a total of 2,837 million ordinary shares issued and
outstanding (including 230 million options exercisable at AUD 3.8
cents), which would be the equivalent of 14.185 million ADSs.
Accordingly, based on the NYSE MKT closing price of US$0.83 per ADS on
April 4th, 2016, the Company has a current market capitalization of
approximately US$11.9 million (the options have been valued at an
exchange rate of 0.7602). Correspondingly, based on the ASX closing
price of A$0.005 for ordinary shares and a closing price of A$0.001 for
the 2017 options, on April 4th, 2016, the Company has a current market
capitalization of approximately A$14.4 million.
SAMSON OIL & GAS LIMITED
TERRY BARR
Managing
Director
Statements made in this press release that are not historical facts may
be forward-looking statements, including but not limited to statements
using words like “may”, “believe”, “expect”, “anticipate”, “should” or
“will.” Actual results may differ materially from those projected in any
forward-looking statement. There are a number of important factors that
could cause actual results to differ materially from those anticipated
or estimated by any forward-looking information, including uncertainties
inherent in estimating the methods, timing and results of exploration
activities. A description of the risks and uncertainties that are
generally attendant to Samson and its industry, as well as other factors
that could affect Samson’s financial results, are included in the
prospectus and prospectus supplement for its recent Rights Offering as
well as the Company's report to the U.S. Securities and Exchange
Commission on Form 10-K, which are available at www.sec.gov/edgar/searchedgar/webusers.htm.
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