Stock Trade Commentary
Cequence released good news today validating their Wilrich formation play. Their latest well IPed at 8.5 mmcf/d (4x the test rate of a typical vertical discovery well in the area) . That is not the best part of the results, in light of the bearishness regarding natural gas prices, why invest in an 85% natural gas company? The answer: Liquid Content.
What needs to be noted here is the liquid content of 25 barrels per mmcf. Liquid content is what makes drilling a natural gas well worth it today because it greatly improves the economics of the well by raising the average sale price for an mmcf of gas. Better yet, the company affirms they have 15 net sections which directly offset the discovery well. This can be translated into a potential of 30-45 additional Wilrich horizontal drilling locations.
In 2 weeks, I am also expecting the initial results of their first Cardium oil well at Garrington. Given that I find their share price to be undervalued to begin with and in light of the recent results, I decided to step in with a small position at $1.83. The focus of the company on oil and liquid rich targets will surely reflect positively on the share price as they execute.