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CEO Spotlight: DXI Ready to Pounce on Oil Fortunes

Featured Submission, Featured Submission
0 Comments| November 15, 2017


DXI Energy Inc. (TSX: T.DXI, OTCQB:DXIEF, Forum) recently announced that they closed on a $2.7 million private placement with funds earmarked for a conventional drill program targeting new oil production in “oil-rich” Fort St. John, British Columbia Canada. With a modest market capitalization of approximately $7 million, DXI is one to take a closer look at.

1. The Peace River district, just north of Ft St John has been a premium destination target for conventional oil production in B.C. since the 1950’s, with more than 300 producing Halfway oil wells. What is DXI's plan to expand upon this region's success?

RH: DXI has been operating its 99%-owned, 14,000- acre Woodrush property, located in the Peace River region for roughly a decade with production exceeding 675,000 barrels of oil. Historically, this has been the hot-spot for oil production in British Columbia and this experience has allowed the Company to acquire intimate familiarity with the geological complexities as it has developed this large land package.

It’s most exciting. Our proprietary, geologically-based 3D seismic picture over 26 sq. miles, indicates clusters of Halfway sand packages within the bounds of our land package adjacent to our current production. To the geological eye this appears to resemble another conventional oil pool in the ‘fairway’. Milligan Creek, located just 10 miles to the west and discovered in the late 50’s, has been for years referred to as a single field. In fact, it has produced over 40 million barrels of oil from another cluster of 4-6 independent Halfway sand packages.

This could be what the DXI exploration effort is inferring to us and has generated high confidence in the existence of additional substantial oil pools, creating the compelling opportunity for DXI to further develop and grow low cost production and reserves.  First on the list for the new development program at Woodrush is Drill Target #1. Comprised of 260 acres, new geological modeling estimates this single anomaly could hold over 5.35 million barrels of oil. Our Geo team projects a recovery rate of 50%, with the average productive thickness being 16 feet.

So this winter we will initiate a new drill program to test this indicated reservoir and, subsequent to success, multiple others. This could provide years of production growth and extremely profitable leverage with our existing $12 million of in-place infrastructure.
 
2. Given current commodity prices, what could this mean to DXI's bottom line?
 
RH: These reservoirs have been dubbed “Halfway” due to the relatively equal percentages of oil and gas that tend to occur. Two factors have made such oil wells highly coveted by the oil & gas industry: Large yields: over 330 of these wells have averaged more than 500,000 barrels of oil and 0.75 billion cubic feet of natural gas each and high pumping rates:

Halfway wells can typically initially produce oil at a rate of greater than 500 barrels per day.  We estimate that new Halfway wells on DXI lands can be put into production at a cost of ~ $2 per barrel. Even with oil prices treaded water at $50/bbl level,  operating margins are extremely lucrative, with netbacks averaging $30/bbl. With prices now rising closer to $60/ bbl, the additional margin is virtually all profit.
 
3. What about drilling costs? 
 

RH: Halfway wells are drilled to less than 4000’ and are completed conventionally, with no need for stimulation. Drill and completion costs through to the tanks is typically C$1-1.2mm per well all in. Fortuitously (for both DXI and investors), drill rigs are currently located nearby, a luxury not always available this far north. Properly executed, this should translate into saving roughly 1/3rd the average cost of rig transport within the Peace River district, representing an economy measured in $100’s of thousands per well.

4. That's impressive savings, what is the end game?
 

RH: Crunching the numbers, success on just four wells in this first sand package could increase the Company’s daily production to over 1,500 BOED. and boost DXI’s present value by $30 - $40 million.  This would form the foundation for strong core production and significant cash flow which DXI would deploy ASAP to proving up the other anomalies in this seismically indicated cluster, multiplying that potential value.  

An opportunity like this comes very seldom, but when it does, it rewards all investors for years to come. In Canada, DXI has harboured over $65mm in historical tax pools just for this occasion. With a series of discoveries, such as what can be envisioned, an ultimate sale could be distributed to shareholders tax free.
 
Full Disclosure: DXI Energy Inc. is a paid client of Stockhouse Publishing.
 
Statements Regarding Forward-Looking Information: This presentation contains statements about oil and gas production and operating activities that may constitute "forward-looking statements" or "forward-looking information" within the meaning of applicable securities legislation as they involve the implied assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated by DXI Energy and described in the forward-looking statements.

These risks, uncertainties and other factors include, but are not limited to, adverse general economic conditions, operating hazards, drilling risks, inherent uncertainties in interpreting engineering and geologic data, competition, reduced availability of drilling and other well services, fluctuations in oil and gas prices and prices for drilling and other well services, government regulation and foreign political risks, fluctuations in the exchange rate between Canadian and US dollars and other currencies, as well as other risks commonly associated with the exploration and development of oil and gas properties.

Additional information on these and other factors, which could affect DXI Energy Inc.’s operations or financial results, are included in DXI Energy Inc.'s reports on file with Canadian and United States securities regulatory authorities. We assume no obligation to update forward-looking statements should circumstances or management's estimates or opinions change unless otherwise required under securities law.
 

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