Incremental Oil and Gas Report Impressive Production Improvements


Incremental Oil and Gas (ASX:IOG) today announced impressive production improvements at their newly acquired Silvertip oil and gas field in Wyoming, USA.  Overall production across all assets was at an average of 820 boepd through November with Silvertip contributing an average of 656 boepd.

Silvertip was acquired by Incremental with most recent pre-acquisition production of 360 boepd in December 2014.  Having been shut in from January due to production issues, Incremental under the leadership of John Whisler (made Managing Director late in 2014), have performed a total of 27 workovers and/or completions on existing wells in the field, resulting in the most recent monthly average of 656 boepd.

The latest production numbers represent a very significant improvement on pre-acquisition production numbers and provide further evidence of IOG’s strength in acquiring under performing assets and using their skills and knowledge to rejuvenate and improve production.  Of particular interest to us was the mention of two recompletions in non-producing areas/wells, resulting in economic production, even in the current low commodity price environment.

Incremental’s financials showed they were close to cash flow positive in Q3, the cost of multiple workovers impacting that measure.  With only 9 workovers so far in Q4, there is the chance IOG may report a cash flow positive position for the quarter.  With that said, we aren’t aware of the cost of the most recent workovers/completions and are wary of the extremely low commodity prices, so we aren’t expecting anything amazing and won’t be too concerned should they remain in a negative cash flow position.

The period over the US Winter, capturing the end of Q4 and start of Q1, should provide a test for the Silvertip field and some guide to the overall performance.  IOG’s remaining assets continue to decline in production, so further improvements at Silvertip in 2016 and possible acquisitions will be critical to building IOG into a strong business.  Current production levels see IOG heavily exposed to the upside of Oil and Gas price improvements in the future.

We love IOG at current prices and will likely look to add to our holdings if any sort of liquidity presents itself.  Management have put faith in Whisler leading IOG and to date it would appear he knows a thing or two about building an oil and gas company.  We look forward to seeing where the company heads going into 2016 and beyond.

Disclaimer: The author and management of this article are holders of IOG stock.  This article should be considered general in nature and in no way personal advice.