Treaty Energy Corp (OTCBB: TECO, TECO message board or TECO.OB) stock jumped up on Thursday on the rare occasion of the company actually purchasing some valuable assets. On Thursday the stock had moved up for the second day in a row adding over 20% before it stopped against a resistance point.
All the fuss is caused by Treaty Energy's purchase of 662 stripper wells, as announced in a press release. Those wells are situated on the property covered by 52 oil leases in Kansas, which the company stated to have acquired. Details of the agreement weren't disclosed and there is yet no 8-K filing to confirm the information.
Stripper wells are considered to have outlived their economic usefulness and can only produce a maximum of 10 barrels of oil per day. The key aspect of purchasing such wells is however their count.
Given that the company would be able to operate 450 of these wells on at least half their capacity that would provide 820 million barrels per annum if each and every well is operational all year round. Given the cost per barrel can go up to $75 in one year the company could make $61.6 in annual revenue.
These numbers sure look rather high for some nearly expired wells. The question is whether the costs of running these wells will be reasonable? If this deal if legitimate we will have to wait for more details on it before claiming the company can actually make some money at all.
User comments