Having lightly researched this I pretty happy to take a position in what is clearly a speculative play, not many blue chips out there offering the potential this has should the drilling confirm the presence of significant volumes of oil. I done the same earlier this year with 88E which has paid off handsomely with early success. This is obviously a smaller field and targets are not in the billions of barrels however given the low MC there is plenty of upside should oil be confirmed.
Looking at the graphics showing "highest intensity hydrocarbon leakage zones" it appears that the company are acting diligently by focusing on the shallower formation targets first, should these confirm reasonable flow potential then I'm sure that they will be able to focus on expansion, first into the other shallow high intensity areas then moving into the slightly less favourable zones.
With 15282 acres and well spacing in the area generally being around 160 acres maximum we could assume that ~95 primary wells could eventuate should the entire acreage be productive. Given that it is very unlikely that the entire acreage be productive then we would be looking more realistically at somewhere around 50 wells initially. Further infill drilling would be done years down the line in the more lucrative areas.
So if we assume that the success case is a 50 well development with average production rate of 400 bbl/d then the best case scenario is about 20,000 bbl/d or $1mil/day @$50/bbl
Someone might be able to correct my assumptions on drill cost however looking at some of the readily available information I would guess that the development cost per well is around $3m? If this is the case then it would be $150m to develop a field that could flow in $365m/year of oil.
Obviously not every well will hit so if the case of 50% success is looked at then we get $182.5m/year of oil revenue which should be enough to shift the needle for potential farming arrangements.
While this current campaign is a 3 well one it certainly has potential to add value to company if decent oil flows are hit. Unlikely to get 3 gushers but 2/3 IMO would be a very good outcome.
http://www.investopedia.com/university/guide-to-trading-oil-and-gas-north-america/niobrara.asp
http://www.incrementaloilandgas.com/irm/content/florence-oilfield.aspx?RID=247
http://www.ugcenter.com/vital-signs-d-j-basins-heart-still-beating-849811
Few articles above are a good point to start for anyone else who is interested in understanding and objectively discussing the area in which AKK operate.
