Hi, Essentially, have I got this right, you are arguing the company only needed new finance of $5,157,333 to get through FY13 (See page 5 of the accounts) and I am saying it needed $11,189,235 because that was the net loss, and I am interested in the company maintaining the size it was at the start of the year right through to the end of the year. You don't seem to mind the company using the non-cash costs such as depreciation to reduce the financing requirement, but I do: the company would be smaller at the end of the year if you do that. The reason I do is that, when it comes to refinancing the debt in August 2016, the price of any replacement debt will be related to the financial strength of the company at that time, and if we are a smaller company then but still with the same size of deb,t then we will probably have to suffer either a higher interest rate or a bigger inducement charge because we will be a more risky company (same sized debt on a smaller company?). I guess you won't agree with that because you will want to factor in a lot of things I haven't e.g. $6m new revenue stream from gas sales, success by Varang, etc. You will see on page 5 that the depreciation cost has been added back to generate the "Net cash used in operating activities" figure of $5,157,331. Most of the $11,189,235 loss that needed plugging to keep the company the same size arose from high central admin costs and from high interest costs on the debt. So I stand by my case that the new debt added was not being used to purchase assets but to pay for ordinary day to day running costs. Only $1.5m was spent on new assets (the gas hook-up?). You will see the biggest item to reduce the $11.2m loss figure to your "cash used in operating activities" figure of $5.1m was actually the issue of new debt in lieu of interest of $3.4m. Anyway much more to the point is will there be new revenue streams between now and August 2016? That I don't know. I would hope we will get $6m p.a. gas sales but the longer our CEO delays announcing this the more suspicious I get. I think I am on record as expecting the fracs to fail to increase oil production by 300 bopd, but I expect Taribani will be successful, but have no idea if success there will come to benefit us or come too late and benefit the debt owners instead while Varang are waiting to start work.
Anymore, some great posters really spoiled by some cras posters, lots of you are very good but quite a few are detached from reality. Nobull has made precise points based on accounts, past and present. This has turned into mostly hype in FRR, what a complete shame to see this BB spoiled.
Is it the same as the report from a few weeks ago, just a news channel's regurgitation or is it new? I'd suspect the former sadly although I don't recall the following bit of copy, does anyone else?
According to the Executive Director of the Frontera eastern Georgia George Zambakhidze, that from today with deposits of Heavy in Mcare main gas pipeline will be more than 75 thousand. cubic meters of gas per day.
Frontera Resources oil and gas company (United States) on their license block in Georgia when developing the deposit Mcare Khevi (Sagarejo district, region of Kakheti, East Georgia) discovered natural gas reserves amounting to 42 billion cubic meters.
"It is established that the field has gas reserves amounting to 42 billion cubic meters, thus creating conditions for Georgia's energy independence in the future," said President of Frontera Resources Steve Nikandros Friday to reporters at the start of production at the deposit of natural gas in the gas network of the country.
The project has been invested $ 400 million. According to the Executive Director of the Frontera eastern Georgia George Zambakhidze, that from today with deposits of Heavy in Mcare main gas pipeline will be more than 75 thousand. cubic meters of gas per day.
Georgia annually consumes about 2 billion cubic meters of natural gas. Nearly half of this volume is from Azerbaijan Republic within the framework of the project the "Shah Deniz" at a reduced price of $ 55 and $ 64 per 1 000. cubic meters. For transit of Russian gas to Georgia gets 10% of the total volume of its deliveries to Armenia.
In addition, gas to Georgia from Azerbaijan comes under the two contracts. The first is 500 million cubic meters of gas, which costs $ 189. This is the so-called "social gas" for the population. Under the second contract is a commercial gas 400 million cubic meters in volume costs $ 240 per 1 000. cubic meters.
Frontera Resources began in Georgia with the 1997 year. On the basis of an agreement with JSC "Georgian oil" and the Ministry of energy of Georgia received a 25-year license to search for oil and gas on the license block XII, which covers 5th. 550 m2. km. Total initial resources unit, which includes the oil fields Taribana, Nazarlebi, Bavarian House, Patara Shiraki, Baida and Muare Heavy, are estimated at up to 600 million tons of oil.
1) net operating cash flow excludes depreciation, as by it's very nature it is a non cash movement. Page 5 of the accounts, you can clearly see it being added back to the net loss to get to operating cash flow.
2) whilst I agree that the company will have to use cash at some point in time to replace the depreciated assets (and I don't include any of the capitalised resources in this asset figure), you have already said in your 23.28 post of yesterday that you don't believe it is purchasing assets. You are therefore contradicting yourself. Furthermore, any investment in long term assets falls under 'cash flow from investing activities'. Even assuming this is all essential, and there was no discretionary spending, FY13 investment was just under $1.5m (which incidentally pretty much equals depreciation).
3) in your first post you say your concern is servicing the debt, but then change your stance to one of not creating value. There is a big difference between creating value and generating cash to cover fixed costs. Doing the first leads to an increased share price, not doing the second leads to bankruptcy. In any event, if your looking exclusively at value then our Enterprise Value (debt + equity) has increased over the last few years (just not in a way that you would have liked) and so therefore that argument is flawed as well.
I always welcome differing opinions, and the debt issue does loom in 2016, but I still think your facts are wrong and you are scaremongering.
It reminds me of my favourite saying...Never argue with an idiot: they bring you down to their level, and then beat you with experience.
For what its worth I believe that this share is just desperate to burst out (forgive the personification). What is holding back potential investors is confidence in the BOD and whether or not any information from them can be trusted. I can't remember now whether we have info on amounts of gas being produced and more importantly income from that. There needs to be a clear unambiguous RNS giving information as to what the earnings are going to be extrapolated from current production values. All in my opinion and without any expertise in any of this lol.
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