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Emerald Oil: Potential $40 Million Deficit In 2015, But Long-Term Breakeven Reasonable At $59 WTI Oil

Emerald Oil (EOX) cut its 2015 CapEx program significantly in order to avoid the need for additional borrowing. It has limited hedges in 2015, with approximately 51% of its oil production for the first four months of 2015 covered by its hedges. As a result, it only expects to drill one well after Q1 2015 and believes that it can be free cash flow positive after Q1 2015 from minimizing spending and leveraging its existing wells.

Emerald may have needed to borrow $40 million in Q4 2014 and would need to borrow another $40 million in 2015 if WTI oil averages $50 per barrel during the year. This would leave it with $100 million in borrowings under its credit facility, compared to its current borrowing base of $250 million.

I believe that Emerald should be able to reach cashflow breakeven at $59 per barrel WTI oil in future years… Read More …