CALGARY, Alberta – After seeing its share price plummet by 11% the morning after it released stellar Q1 results, Writedown Resources plans to release much poorer than expected results in the second fiscal quarter.
The Calgary-based intermediate oil and gas producer figures it can play reverse psychology on the market and benefit from a surge in share price in the middle of July 2014 with this new strategy. The company’s President & CEO explains.
I really don’t understand the markets’ response to Writedown significantly beating reserves, production, and capital guidance. Our debt-to-funds flow ratio is as healthy as it’s ever been at 1.17, and we beat analysts’ prediction for our after-tax debt-adjusted cash flow per share. This is mind boggling. I, and the rest of the executive team, strongly believe that releasing poor results is the way to gain back investor confidence – Thomas Touchit, P.Eng., President & CEO
According to Dick Stroker, Writedown Resources’ VP of Operations & Development, the company will achieve reduced production results in creative ways. He plans to burn through roughly the entire year’s worth of capital budget in 2 months by drilling and multi-stage fracking a significant number of dual-leg horizontal wells into the aquifer that underlies one of the company’s core properties.
His plan? To produce water from the pressure-supporting subterranean ocean to steal energy away from the producing oil wells. “I expect total fluid rates to drop by at least 50% with our “back off aquifer” technique, and the oil rates will follow in lock step. This will help us come in waaaay under on our daily production guidance. In fact, mid-Q2 2014 I will recommend to executive management that we announce a lower production target to the streets, just to get then ready,” Mr. Stroker explains.
The company expects the significant drop in production, that it expects to be down roughly 80% of its Q1 2014 guidance, to automatically take care of a bust in reserves that the company has promised to the streets.
And just to top off this reverse psychological PR stunt, the company plans to stage at least 1 Category A major oil spill incident, 3 major lost time incidents in the field and 1 in the office, and at least 7 reportable near misses. Stroker continues, “If all of this doesn’t speak to poor results, I’m not sure will.”
Energy analysts are dumbfounded by the company’s plan, and its competitors believe that such investor relation tactics will shed a bad light on the credibility of all oil and gas producers. But Writedown Resources is sticking to its belief that if great results yield a drop in share price, then the converse must also be true.
2P News Finance will continue to follow this story and will be first to report on the results as they become available.