Rising oil prices bolster profits for debt-free Brookside
Debt-free and unhedged Brookside Energy has significantly grown its cash pile in the third quarter of 2023 from its SWISH Area of Interest in Oklahoma, as oil prices continue to surge.
With a relentless focus on growth and a strategic approach to tapping into the oil-rich Anadarko Basin, Brookside Energy (ASX:BRK) has delivered record free cash flow on strong production and increasing oil prices.
The company’s latest financials reveal a cash windfall of $12.9m and positive operating cash flow of $6.3m. Notably, Brookside achieved record free cash flow of $5.2m, resulting in a substantial 20% increase in cash reserves compared to the second quarter.
Brookside’s cash stockpile now stands at a healthy $28.1m, even after accounting for the $2.8m spent on its on-market share buyback.
One of the key drivers behind the strong financial performance is consistent net production, which amounted to 1,517 barrels of oil equivalent (BOE) per day, with 67% of this being liquids.
The four operating SWISH AOI wells delivered gross production of 214,267 BOE and cumulative production to the end of the quarter of 1.4 million BOE.
Brookside noted that all four wells are producing at or above pre-drill estimates and are on trend to meet or exceed the company’s forecast estimated ultimate recovery.
Two of the wells have already achieved pay-out and the others are on track to achieve this important milestone.
A significant milestone for Brookside during the quarter was the production of its one-millionth BOE, which included 715,000 barrels of liquids. This feat was accomplished in less than two years since the company’s first well came into production, highlighting the company’s rapid growth and efficiency.
Brookside is well advanced with plans to monetise its 11.9 million BOE proved and probable reserves (2P), which are valued net to Brookside at $US170.5m ($268m).
During the quarter, the company also expanded and consolidated its acreage position in the core of the Woodford “Oil Window”, responsible for a substantial proportion of Oklahoma’s oil production.
This fresh patch of 400 acres, which increases Brookside’s acreage position in the area by 12.5%, sits adjacent to and north of the successful Courbet wells and the Gapstow well owned by top 10 independent US oil producer Continental Resources.
The testing of the Juanita Well was another highlight of the quarter, with Brookside reporting a peak production test rate of 258 barrels of oil equivalent per day (BOEPD), 78% of which was oil.
Juanita is the first well to be tested in the Bradbury Area of Interest (AOI), located within the Arbuckle Uplift in the Ardmore Basin and 20 miles west of Brookside’s prolific SWISH AOI.
The success of this new well paves the way for Brookside to establish a second production base with low-risk, rapidly deployable wells that promise high rates of return.
Brookside continued its on-market share buyback program during the third quarter, which acquired 4.4% of the company’s issued capital and returned about $2.8m to shareholders.
“This quarter’s results have produced some outstanding financial metrics and demonstrate what you can produce in a low cost, low risk operating environment like the Anadarko Basin,” managing director David Prentice said.
“With a cash balance that now represents more than half our current market cap we think the market is missing a major opportunity here as oil prices remain elevated and cost pressures abate.
“Not that we can complain too much as the current price allows us to progress our initial share buyback and repurchase shares at a massive discount to their NPV.”
The company’s financial performance is not just a result of its strategic initiatives but also the favourable market conditions. With oil prices appearing to have reached an inflection point and trending upward, coupled with a stabilisation in service costs, Brookside is poised for substantial growth.
This article was developed in collaboration with Brookside Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.