SAGD ain't so easy

SAGD stands for steam assisted gravity drainage;it is the most frequently used method of mining heavy oil.The idea is to drill two parallel wells about five to six metres apart.Steam goes into the top well and bitumen goes into the bottom well.The heat from the steam turns tar into bitumen.The bitumen is them pumped to the surface.
 Southern Pacific Petroleum has a SAGD system in Fort Mackay, Alberta and one in Senlac, Saskatchewan.It has three well pairs for each.It has four well pairs that are in conversion to the production phase and five others that are in the pre-conversion stage.But from the three in the production stage at Mackay in September Southern Pacific got only 850 barrels per day in order to repair the steam chambers in the top well.Production climbed slowly in November, December and January.The company at first  used high pressure steam stimulation (HPSS) to increase daily production.But this was found to be not effective enough although it did stimulate production.Then Southern Pacific turned to another method called inflow control device(ICD) and production has responded. Production from the Mackay facility is now up to 2187 barrels per day and total production is now almost 4300 barrels per day.It is still down from production in the third quarter of 5000 barrels per day.Southern Pacific reports that the flow form one of their well pairs  now is even 200 barrels per day higher at the peak rate .Also the four new well pairs will soon be ready to come onstream.
     The next quarter
During this hiatus, production at Senlac, Saskatchewan has remained stable.But Southern Pacific needs production now to rise at Senlac.But ,of course, the bigger problem is at Mackay.Production figures which are given every month(in an operational update) needs to be close to 2300 barrels per day at Mackay ; then total quarterly production will be close to or exceed the September 2013 figures.If that happens and Southern Pacific management thinks it will then STP should trade at October levels of about $.70 per share.The price per share now is less than $.30 and this blog expects the price to move slowly up to September levels.At this point it seems like STP is only experiencing growing pains and needs (ICDs) in a few more well pairs until the new well pairs come onstream.