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Un .. you are getting closer ...
Sorry, the last paragraph shouold read "appraisal accounting methodology to project accounting methodology".
Also the interims are due soon. I have no idea what detail they will go into but i anticipate a loss for the first half of the year of between $1m and $2m. I aslo expect this to be offset by a corresponding profit in the second half of the year. Acceleration of the investment programme should therefore start in the Spring 2021 unless we flow a deep before then
Hi Coffee, I've been out for a very pleasant walk in the Peak District, so sorry not to have got back to you. I think you are rather missing the point. Now that we have better information about cost of sales because we have gone over from an appraisal accounting methodology to a project accounting methodology, it is possible to calculate contribution to overheads tax and capital costs, after cost of sales and selling costs (check the 2019 accounts).
This shows that the contribution covered overheads and tax ( I'm putting that at $2.7m pa for the license but i believe this is being challenged) in January and February and left about $300k pcm surplus on average. This was when domestic prices were about $18 and international prices averaged $55 and output pcm was just over 40K barrels pcm
The contribution is a good measure of underlying profitability, but of course has to be enough to cover overheads and tax. Anything left over after that can be put towards capital expenditure.
The right questions to ask now are therefore firstly what is contribution pcm and secondly what is it being spent on. I have attempted to create a small spreadsheet model which gives a reasonably good answer to the first question.
I think it is fairly obvious that the answer to the second question is that we are trying to cover the losses which we inevitably incurred during the covid period. If we manage to do that then we may be able to pay back some loans (some of which are currently financing MJF drilling activity). Only after that can we accelerate out investment activities.
Which of these we will be able to finance can to some extent be forecast by plugging different assumptions about output, domestic and international prices and export percentages into the model.
The reason why your recent contributions have not been particularly relevant (although factually accurate) is that you are still working on the appraisal accounting methodology and the company has now moved to project appraisal accounting. Listing items of overhead that have already been plugged into the model, or calculating the cost of various bits of capital expenditure which lie outside the model, I'm afraid, as I said earlier, missing the point.
The Acid has not failed Coffee.
Give it a break Coffeecups, you come across as being didactic!
Then add in the cost for the acid workovers already done ( failed) and the acid workovers yet to be done .... the expenses column keeps getting heavier as I remember more research ...
£100k a month dock fees for Boaty McNonDrill Face ... plus the essential maintenance, servicing, recertification and repair Bill's not included ...the longer these sit around unused they degrade quicker, hope they are making themselves afford the preventative maintenance issues as well or thatcouldne a nasty sting in the tail come de/recommissioning time in 2022.
Brent ticking up nicely tonight.
For the A5 sideteack cost Clive gave a global um ahh figure at the agm so I used the bico tender website figure for a ball park as that seemed more realistic.
Un .. need to add in the cost of the drills and the 3rd A5 sidetrack,Clives salary was 250k now 500k,add in the other Directors etc ... it will be another loss in 2020 and this will continue until three deeps are flowing on an international licence... or MJF is pumping at circa 4k and they stop the deep expenditure ( deep drill cost circa $ 10m, plus clean up and acid costs.
The A5 well is about to have the cracked tubing replaced, which may take a week or so.
If successful we could see it flowing at 1,500bopd as before and who knows 3,800bopd as originally flowed at.......doubt it will be close to 100bopd (this low flow was mostvlikeky down to the cracked tubing).
Ergo massive production and revenue increases could be around the corner.
If they get the export capacity license within the next couple of weeks we coukd see a different animal pretty quickly for a change, especially with 151 well results due in around 6 weeks to boot....152 in Sept.
We won't have to wait three months for this news good or bad.
good stuff uncertain. Make sure you submit your questions for the AGM.
The last month for which we have full information is February. The information we had in that month included output for the month, % of output exported and both international and domestic prices. Since then one or more of these pieces of information has been missing
For January and February it is possible use the average cost of sales and the selling costs per barrel from the 2019 accounts to calculate that in both of these months a contribution of over $1m was made to overheads, tax and drilling expenditure. This would have been enough to fund a full MJF infill programme.
In March and April we have output figures but neither export percentage figures nor domestic and international prices (although we know the latter were about $25). In May we have a figure of 1700 bopd from half way through the month but no final figure. We do know that any output in May was sold at domestic prices at "less than $10".
This information should be updated soon in a Q2 report, probably shortly before the AGM. However it is clear that in March and April, while operating and selling costs were probably covered, contribution would have been inadequate to cover overheads. In May an operating loss of about $0.5m can be deduced from the little information available. My best guess is that an overall loss of about $2m will have been made in this period. Ihave not factored in any reduction of costs in this period because we really are only guessing at what they might have acheived here
My calculations for June based on a return to the 60 40 international domestic split, suggest that we are back to covering overheads assuming 1700 bopd is being maintained. Obviously in order to offset the losses in the spring then we need an increase in output. Fortunately the resumption of the infill programme and workovers on existing wells should deliver this.
My calculationis suggest that if we can return to 2000 bopd (as CC has suggested should be easily achieved)then we should cover overheads for the year and leave a small profit before tax (although we are unsure what tax will be at present - CASP are disputing this with the government)
For an ability to accelarate investment and pay for new drills undertaken during the year we need the oil price to move upwards towards $50, or output to rise above 2000 bopd or some combination of the two.
Adrianz, you will be glad to know that I have moved on from my back of an envelope approach and researched all outputs prices costs and export percentages where they are available from RNSs or elsewhere