The MPO - SD Mississippi Lime Merger -- Mike FIlloon -- February 12, 2018

Link over at SeekingAlpha: summary --

• MPO's Mississippi Lime core production results show there is little viability in the play
• while payback times are short, depletion and costs associated with produced water disposal are an issue
• the merger seems to be a good idea for both MPO and SD, but not good for investors
• there are too many issues with the play (earthquakes) and we think the acreage has little value

From the article:

Chesapeake, Sandridge, Range Resources, and Devon all had or have significant acreage in the Mississippi Lime. We have seen the majority of players give up on this geology. There is some interesting geology near the Nemaha Uplift, but as a whole, this play produces too little oil and too much water.

Filloon's conclusion:

MPO's well economics are difficult, even with a low D&C cost. Using an oil price of $55/bbl. we can decrease by $3/bbl for differentials. We can pull $12/bbl for costs (LOE, taxes, etc). Oil revenues in 16 months are a little over $2 million. Natural gas revenues add another $1. The $3 million generated versus a D&C of $2.5 million looks good until we figure in costs for SWD. Disposal wells cost another $1.2 million.

The key to the data is oil production at the end of 16 months. Although the payback time is important, oil production once payback is reached helps define a plays viability. MPO is motivated to merge given the synergies, but the play will be difficult to develop even if oil prices move higher. Sandridge is motivated to obtain the NW STACK acreage. While the combination improves the situation for both operators, we believe much of the acreage has little value going forward.

Much more at the link.

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