If algar gets up and running on schedual we should be exceeding 13,600 barrels per day in the July 2012 - July 2014 period. Excess capital from that period would could be put towards paying off the final note which would decrease the production requierments in that final period if I'm understanding this properly. We also should be exceeding 9,500 barrels per day this time next year, again, assuming algar gets up and running on schedual. Like always it comes down to Algar. I'm a newer investor so I don't know the amount of time requiered for ramp-up etc. However, management claims they hope for 1,685 barrels per day from algar next year (annualized).
Because management seems to have a habbit of over estimating even if we assume algar produces half of what they say next year which would be 843 barrels per day (annualized) then if production at pod 1 is 9000 barrles per day (and I know that's a big if) they would be able to slightly exceed what is needed to pay off the first note. And as long as there aren't any major issues algars ramp-up would continue into 2011 which could see us producing upwards of 16,000 barrels per day which again would give us significant extra revenue to put towards the final note, again decreasing the production requierments in that final year and a half period.
IF Algar gets up and running on time and IF it is able to meet production expectations and IF oil prices don't fall on us again - then I think we are positioned quite well actually. If oil prices do slowly rise over the next six years we will also see increasing netback which make us even better off.
The company needs to demonstrate that POD 1 can produce consistently and they need to demonstrate that they have learned from their mistakes in POD 1 as tey get Algar up and running. If they can do that then we will see an increased SP and they will be well positioned to meet debt requierments.
