Current SARA Stock Info

Saratoga Resources, Inc. (ticker: SARA) today provided an update on the status of previously announced drilling operations as well as guidance regarding certain anticipated year-end 2012 financial results and hedging information.

With respect to the previously announced SL 195 QQ-25 “Roux Toux” well in Main Pass Block 47 Field, the well was drilled to a total depth of 8,453 feet MD (8,000 feet TVD) and was successfully completed as a dual in the 13 and 17 sands. The well recently underwent flow testing and demonstrated an initial production (IP) test rate of 290 gross barrels of oil per day (BOPD) and 2.5 million gross cubic feet of gas per day (MMCFPD), or net 509 barrels of oil equivalent per day (BOEPD). Flowing tubing pressure (FTP) was 1,800 pounds per square inch (psi) on a 14/64” choke on the short string and 275 psi on a 30/64” choke on the long string. The well has been tied back to the Company’s Grand Bay facilities.

The Company also announced total production for 2012 of approximately 1.1163 million barrels of oil equivalent (MMBOE), or an increase of 18% over total 2011 production. 2012 production was comprised of 61% crude oil and 39% natural gas. The increase in production was achieved in spite of the production shut down due to Hurricane Isaac in the third quarter and lingering effects into the fourth quarter of 2012. Saratoga sells crude oil on the Light Louisiana Sweet (LLS) and Heavy Louisiana Sweet (HLS) markets, which are both currently at a premium of approximately 20% to West Texas Intermediate (WTI) posted prices. Saratoga’s natural gas also sells on Louisiana markets and the Company receives a premium over NYMEX Henry Hub posted prices, due to BTU content and quality adjustments. In addition, Saratoga announced that it anticipates reporting discretionary cash flow of approximately $0.97 – $1.00 per share for 2012 in spite of the loss of discretionary cash flow in 2012 due to Hurricane Isaac production interruptions.


The Company also provided an update of its current hedging position as follows:

1,500 BOPD
LLS & Brent
1,000 BOPD
833 BOPD
917 BOPD
500 BOPD

Management Comments

Mr. Thomas Cooke, Chairman and CEO of Saratoga Resources, said “We are pleased with the results of the QQ-25 well. The production tests were better than anticipated and the well came in under budgeted AFE costs. Continued results like this well should set the company up in 2013 to exceed its 2012 production growth rate of 18%. While it is always nice to announce a significant increase in annual production, that is particularly true this year when we had 100% of our production shut-in for approximately 17 days due to Hurricane Isaac and it was well into the 4th quarter of the year before we were able to get all of our wells back on line. We estimate that these shut-ins resulted in deferred revenue in 2012 of between $7 and $8 million dollars. In spite of those interruptions, we anticipate reporting year-end discretionary cash flow of approximately $0.97 – $1.00 per share and we think these are very strong results.”

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Mr. Cooke added “As a result of weakness in natural gas prices during 2012, we anticipate that Saratoga, like many other operators, will be reporting some write-downs in year-end reserves driven by negative gas pricing revisions based on required SEC pricing models. We have recently reprocessed our proprietary Grand Bay 3-D seismic data and have re-launched detailed field studies and expect some exciting new opportunities to arise out of that effort. Back in 2008-2009, during the first phase of our field study, we increased reserves by over 40%. While we do not expect such a big increase this time around, the integration of the newly-reprocessed 3-D should yield some good results with high-grading of development drilling opportunities with a higher liquid component.”

Saratoga was interviewed at EnerCom’s The Oil & Services Conference in San Francisco in February 2013. The video can be viewed below.


2012 Results Conference Call

SARA will host a conference call to discuss its 2012 results on Wednesday, March 27, 2013 at 9:30 AM CDT (10:30 AM EDT, 7:30 AM PDT).  The call in phone number for those wishing to participate is (800) 736-6099 for U.S. participants and (914) 495-8532 for international participants. The participant code for both U.S. and international calls is 20088841. The call will be webcast and archived. The webcast can be accessed on the Company’s website at

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Oil & Gas 360® compiled a few paragraphs from research analysts who wrote on Saratoga following the announcement.  OAG360 suggests that you contact the analyst and/or salesperson to receive a complete copy of the report. Please read the important disclosures at the end of this note.

*Brean Capital (3.7.13)

Solid Production Growth Despite Impact of Hurricane Isaac in 2012

Investment Summary

We reiterate our Buy rating on Saratoga Resources, as completion of the “Roux Toux” well supports our thesis that the production growth story remains intact for 2013. The SL 195 QQ-25 “Roux Toux” well demonstrated initial production of 290 gross (209 net) Bbls/d and 2,500 gross (1,800 net) Mcf/d or approximately 707 gross (509 net) Boe/d. The company announced total production of 1,116 MBoe (61% oil) in 2012 versus our estimate of 1,168 MBoe (60% oil). Management reaffirmed its guidance for cash flow of $0.97-$1.00 per share in 2012 compared to our estimate of $0.98 per share. In addition, management anticipates the company will report some write-downs for year-end reserves due to weak natural gas prices during 2012. We contend that the impact from Hurricane Isaac was overdone and Saratoga’s large inventory of oily PUDs, workovers, and recompletions will drive production growth in 2013.

Key Points

Saratoga Resources completed the SL 195 QQ-25 “Roux Toux” well in its Main Pass Block 47 Field. The “roux Toux” well was drilled to a total depth of 8,453 feet MD (8,000 TVD) and completed as a dual producer in the 13 and 17 sands. The flow test yielded initial production rates of 290 gross (209 net) Bbls/d and 2,500 gross (1,800 net) Mcf/d or 707 gross (509 net) Boe/d on a 14/64″ choke on the short string and 30/64″ choke on the long string. Management noted that production tests exceeded their expectations and the well was completed under budget.
The company announced production increased 18% to 1,116 MBoe (61% oil) in 2012 from 946 MBoe in 2011, despite the impact of Hurricane Isaac. Production was just shy of our 2012 estimate of 1,168 MBoe (60% oil). All of the company’s production was shut-in for approximately 17 days due to Hurricane Isaac in 3Q12 and lingering effects were felt well into 4Q12. With the successful completion of the “Roux Toux” well and the “Buddy” well in late January, we believe operations have returned to normal.

Management reaffirmed its 2012 guidance for cash flow of $0.97-$1.00 per share versus our estimate of $0.98 per share. In addition, management expects the company will report some write-downs for year-end reserves as a result of weak natural gas prices in 2012, which has been common for natural-gas levered E&P’s throughout earnings season.

We contend that the production growth story is intact, despite Hurricane Isaac, based on Saratoga’s large inventory of oil-weighted PUDs, workovers, and recompletions. The company plans to drill 8 additional oil wells (6 PUD locations) in 2013, as well as multiple workovers and recompletions. We forecast production will increase 44% to 1,687 MBoe (59% oil) in 2013, and reiterate our Buy rating. While we are buyers here, we see some risk to our $9.00 per share net asset value estimate and $8.00 per share price target, which are based on the company’s reserves.

Valuation / Target Price

Our $8.00 price target is equal to 85% of our $9.00/share NAV, which assumes midcycle NYMEX benchmark oil and gas prices of $85/Bbl and $4.00/Mcf.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable.  This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note.  This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary.  Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results.  EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services.  In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies.  As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note.  The company or companies covered in this note did not review the note prior to publication.

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