Friday, February 6, 2015

Bonanza Creek Energy Gives Disappointing Updates But Makes The Right Move

This article was first published by Seeking Alpha on January 21, 2015

By Sarfaraz A. Khan. Research Asst. Omar Edwardhams

On Tuesday, Bonanza Creek Energy (NYSE:BCEI) released several updates regarding its reserve base, operational outlook and financial guidance for 2015 and the fourth quarter production numbers. Bonanza Creek Energy operates mainly in Colorado's Wattenberg Field -- which accounts for a majority of the company's production - and Arkansas's Cotton Valley trend.

Bonanza Creek said that it has increased its year end proved reserves by 28% to 89.5 million barrels of oil equivalents on a 2-stream basis and 97.3 million barrels of oil equivalents on a 3-stream basis. This growth was disappointing since the company has been increasing its proved reserves at a compounded annual growth rate (CAGR) of 43% between 2007 and 2013.

Additionally, for the fourth quarter of 2014, Bonanza Creek Energy said that its sales volume will come in at 25,900 barrels of oil equivalents a day (2-stream). This was lower than market's consensus estimate of 27,000 barrels of oil equivalents a day, according to a report from Topeka Capital Market's analyst Gabriele Sorbara emailed directly to me. The miss was largely due to the midstream downtime in October and November, delays over five well pad and cold temperatures in the final two months of 2014 which dragged production by 650 barrels of oil equivalents a day. Overall, these problems hit the company's production by 2,000 barrels of oil equivalents a day. Without these issues, Bonanza Creek Energy could have easily met the market's consensus as well as Sorbara's estimates.

The fourth quarter production numbers implied.…. Read full article at Seeking Alpha