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Ignore that KK, I was being a bit lazy .I've looked up netbacks on investopedia and it says it should be revenue net of all costs, and also that it is not an internationally accepted accounting term, although commonly used in the oil industry. I am unsure whether it is supposed to be calculated on an annual basis or over a longer period of time.
Either way, it is an average backward looking concept which is likely to prove an underestimate in situations where output has suddenly increased substantially (as is the case with CASP now). Because some of the costs are sunk costs, the cashflow benefit is also likely to be greater than the netback for the current period.
Going forward, the netback should rise with the recently improved bopd per well, as revenues per well improve while drilling costs remain the same. In other words, unsurprisingly, if an oilie suddenly becomes more productive and successful then its netbacks improve. I think we are entering such a phase at CASP which maypartly account for our differing projections
KK I may be being a bit dense here, but could you give me a definition of what netbacks actually means in practice (i.e. which categories of cost are being covered). Thanks for looking out the tax transportation stuff for me
CC I agree 100% with your proposed strategy below. MJF ought to be their focus this year with a better financed renewed attempt on the deeps next year. Unfortunately their track record suggests they may be tempted to get back on the deeps strategy earlier than they should.
Gross revenues agreed but net backs from $70 gross was $45 and Clive did give the split in transportation/tax etc as I asked the question. I have detailed it on one of my posts I believe , see if I can find it.
KK, I have a longstanding problem with the opacity of the accounts and the meaning of costs (fixed, variable etc) in response to shareholder questions. The basis of my calculation is an output of 2000 bopd which is composed of 1350 from the old wells and 650 from the new well. I have assumed an export price of $70 and a domestic price of $18.
I have no reason to suppose that we are not getting near to the 70:30 export domestic split but perhaps I am being a little optimistic there. My spreadsheet simulation is based on their latest breakeven figure which I have used to infer possible variable cost / fixed cost combinations which I then plug into the new output and price figures to generate a profit figure.
I usually refer to this as my "dodgy spreadsheet" as I am aware that it is not based on full information . In particular I am aware that I don't really understand the tax regime so if anyone out there does, I would appreciate their advice.
Having brought quite a lot of staff inhouse recently, I suspect that most of their costs are fairly fixed in the medium term, and that therefore the additional costs per barrel are pretty low. I will concede that my estimates may be at the optimistic end, but I think we are in solid profitable territory going forward.
Agreed. Font spend any money on the deeps but I suspect that will depend on getting an interested partner. They were in a weak negotiating position at 1300bopd but the additional 945 ish barrels plus another horizontal gives them options. Drilling a deep and failing is crazy and sets them back. Get a partner in and share the spoils after 8 years of failure.
Much that I want to , I couldn’t get to your revenue and profit numbers. Current recent in 2021 will have declined with MJF depletion, c1300bopd capacity . Also stating that most of the production could be sold at export prices do that could be any number from 51%. If you took the 1300bopd plus the 645 as current ,added SY from October , a 70:30 split on all using $45 snd $13 net backs. Doesn’t get to your numbers ?
Kk agree completely. That said the shallows need to be strong enough to support the deeps cash flow drain.
Shin needs to fast track mjf within 6 months then use all those funds to complete deeps at same speed, get rid of 3ab to focus on the deeps being the sole cash flow drain, get a farm in partner on everything apart from mjf and yelemes.
KK, I think they probably do have the financial resources to go 50:50 on a deep. I estimate their monthly profits at around $1.2m pcm, so depending on the schedule of payments they could afford that before xmas. I'm not saying they should do that, just that they could.
They know the shallows won’t give them them the sp appreciation they want, that comes from the deeps and the exploration phase of the licence has 4 years to go although I suspect they’ll be able to extend but nothing guaranteed. Currently spending all the shallow cash on the deep money pit so our Mr Shin needs to articulate why and how he’s going to turn it into a success.
Also, the Bico tender sum for 802 was 2000,000, 000 which is c$4.6m so not enough for a deep drill and I can’t believe Caspian are going 50:50 as they need to spend current cash on shallows to build reserves.
Still see oil bouncing again and having another go at $80 this quarter. So many variables in play, nobody can accurately call the trend.
We’ll get an RNS pre SQ’s but I suspect that there won’t be knew stuff. At least 2 of my questions ask for stuff not in the public domain so they need to get it out there if they’re to answer them. There’s not much going on operationally so I’m not expecting any new developments not even SY which I believe will be later in Q3. 802 ? That was meant to be drilled pre end of 2018 but the recent Bico tender doc suggests they’re tendering now but we know they haven’t got the available financial resources to go it alone, same with A9. Need a partner for the whole deep program and hoping Shin has some influence there.
No new news for me, just clarification for the SQ session but as always, happy to be proved wrong.
Brent is retesting $70 this morning. It previously fell after the OPEC announcement of increased output but then bounced back. We are however in the silly season over the summer, and I expect the direction for Brent to be properly sorted out in September