Osage (OEDV)

[dan_s]

The company gave us very limited info on their first two operated wells.

> The first Mississippian well: "...announced today a peak twenty-four hour rate on its first operated Horizontal Mississippian well, the Whitten 1-3MH, of 584 Barrels of Oil Equivalent (BOE). The product mix was composed of approximately 65% oil, 15% Natural Gas Liquids (NGLs), and 20% natural gas. Osage has a 62.5% Working Interest in the well, which is located in Section 3 Township 16N 3W in Logan County, Oklahoma. [Looks like a decent well, but way too early to tell for sure.]

> "Our Woodford well, the Whitten 1-2WH, which is much "younger" because of the timing in flowback and pump installation, has already produced at a rate of over 340 BOEPD in its early days, which may trend higher based on the total fluid rate and oil cut that it is currently producing. Notably, the product mix from the Woodford well is oilier, and the natural gas is even richer. With an average working interest between the two wells of 69.15% versus our historic average of about 17%, at current rates, Osage’s share of the oil and gas from its first two operated wells increases the Company’s overall daily production by more than 50%.”

My Take: Very hard to tell much from the limited info given. It would be nice to know how long the laterals are and how many frac stages were completed. I am a bit skeptical about these guys. OEDV is High Risk / High Return. VERY SPECULATIVE at this point. Hopefully their Q2 report will contain a lot more info.

[dan_s]

An updated Net Income & Cash Flow Forecast model has been posted under the Watch List Tab. I have lowered my Fair Value Estimate to $2.00/share.

There is still hope for this one, but they need to show some real production growth over the next two quarters. My guess is that Q2 production, which they did not mention in this week's press release, will be flat to Q1. They did say the two new wells, which came on in July, double their net production. What we need to see is how well these wells hold up and if Osage can pick up the pace of getting wells drilled and completed. If they can complete two new wells each month, the stock should move higher.