EDMONTON, Alberta – Morning Wood Resources (TSX: MWR) posted the chubbiest quarterly adjusted profit of any listed company on the TSX driven very high crude oil prices and swelling production.
MWR lead a group of peers in some rock hard competition of intermediate oil rivals including RamRod Resources, Tent Pole Oil & Gas, and Silent Flute Energy, who also reported a surge in profits last quarter. Net income rose to $17.6 billion in the third quarter, compared to a relatively flaccid $4.3 billion a year earlier, the Calgary-based company said on Sunday. Its free cash flow rose by 43% from a year earlier to $1.4 billion.
The company is using the windfall to reduce debt and investigate a throbbing expansion of its artificial lift production capacity in its core operations near Morehead, Alberta. MWR is also betting that demand for its free-range barrels will remain hard-on through 2022 Q4 and into the first half of 2023.
Morning Wood “fully expects demand to continue to grow for its crude oil and is plans to erect 34% more rigs in its Q4 drilling program that focuses development in the shallow Musty Beaver trend of the late Pre-Cumbrian Hornmeister formation” Chief Executive Officer Morley Cummingsloe told 2P News.
“Our operational and financial performance is a testament to careful, deliberate planning, and making a shift away from drilling into older reservoirs that have been developed for, say, 55+ years, with hundreds of penetrations, and move towards drilling into younger, Virgin oil pools that are just ripe enough for exploration, if you will,” continued Mr. Cummingsloe.
But despite Morning Wood’s stellar year-over-year success, at least one industry observer forecasts cloudy days ahead for the Calgary-based stock market darling. Peter Northrod, an energy analyst with Spread Eagle Capital, warns that the company’s shortsightedness in how it completes its wells may lead to a stock price collapse by YE2024.
“Sure, the company is drilling into super tight assets along the Musty Beaver trend in Central Alberta, but they are currently completing the wells open hole without even running liners. The problem here is with these super tight rocks, that are hard to get into (yet so rewarding), the company should be employing some sort of hydraulic fracturing technique to loosen things up and get the proverbial juices flowing downhole,” Mr. Northrod told 2P News. He continued, “An option that might appeal to MWR’s drilling and completions team could be the novel and proprietary Plug-Insert-Seal-&-Squeeze technique offered by Custard Slinger Oilfield Services. Unlike conventional fracturing methods, the PISS method relies on forcing a creamy, gooey type substance into the horizontal section of the wellbore, under pressure, until it explodes into the rock to viscosify the liquids and enable them to flow out of the hole more freely” Mr. Northrod said.
Only time will tell how the company’s fortunes will progress, and 2P News will be here to report on developments as they become available.