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Formerlyeasyp
Like you I have held CNE shares for sometime. If I take the 56p divi and sell my remaining shares I would just about break even. However since reading Lot-m posts I’ve decided to hold and see what happens. Thanks Lot-m your post are always interesting and informative.
LOTM raises a good point about the baggage or the psychology of investing. I was here some years back patiently waiting for that money from India which eventually arrived and we had hopes of £3,4,5 a share etc but events like covid and the management put paid to them. I sold at a loss and found other things to bet on but continued to watch CNE.
I struggle to stop loss a share as it means having to admit you were wrong. One can kid one's self by saying you were early into something but anything more than 18-24 months really means you were wrong imo. Suspect I am not alone and have averaged down on dogs then waited years for a recovery (POS) or just walked away late in the day (HUR).
Yet I am back in a small way because like LOTM and others I can see a positive long term story here. Fingers crossed, wait and see.
Hi formerlyeasyp,
I've only been around CNE since the beginning of May, so I don't have the same baggage to carry that others do.
Yes the consolidation will take the share price back to roughly where it was previous to the xd date.
I'm in for the longer term value that is being generated going forward. After the special dividend payment & share consolidation is done (& the buy-back) there will be under 100M shares left in issue.
Next year & thereafter there going to be cutting admin costs by $50M a year from $70M currently to just $20M. So that's a saving of $0.50 a share going forward. So in 4 years the G&A saving will be worth the current market value of the company. Which is something people need to get there head around.
LOTM
Hi LOTM sounds good/great although the divi is also subject to some form of share reduction scheme but with winter approaching and the price of oil and gas on the up CNE seems like a good bet. Good luck to all who have been here a while it has been a rough ride.
Gruyere,
Going by what happened in May it will be in the circular that is about to be issued probably tomorrow or Monday.
I'm hoping for a ratio of 37 new shares for every 60 currently which would mean that there would be just 88M shares in issue post consolidation or 19 new shares for every 30 currently which would mean 90.5M shares in issue.
If it turns out to be 2 new ones for every 3 currently I'll be a disappointed as that will leave 95.25M new shares in issue.
LOTM
Maybe a word of caution regarding the special Divi for any newbies. It is linked to another share consolidation ( there was one on May), i.e you'll get the 56p and then see a reduction in the number of shares you hold. I haven't found what the proposed reduction is yet . If I've missed it glad if anyone can inform us.
Mr.kioto,
They announced the amount as £0.56 per share in the announcement.
If you receive dividends in another currency like $'s then they will probably announce the exchange rate that is going to apply at a later date.
Given the exchange rate is close to $1.25 to the £ currently then if it were today the rate would be approximately $0.70 per share.
LOTM
**Dollar amount per share
So its confirmed that 100 million will be returned in October. How come they did not confirm the actually dollar amount? Does anyone know what this comes out to per share ?
Formerlyeasyp,
Well you bought back-in at a price for cash & net receivables only & you'll shortly get £0.56 a share of that cash back very soon.
The Egypt business and all the possible contingent payments are for free.
Personally I regard this as a massive cash-cow going forward, the dividends are going to be significant.
LOTM
One of the reasons I just bought back into CNE this morning.
Thought post India $1bn the company was a huge disappointment and still not convinced investing in Egypt was a great move but clearly the management are taking steps to generate some shareholder returns so back on board with 3,000 shares via HL.
Yes there's meant to be a special dividend of $100M coming.
Most likely in the 4th Quarter of this year. I'm sure they'll be more information on it in the half-year announcement tomorrow.
LOTM
Anyone upto date with this?
Wasn't there rumour of special divi (again) later this year (2023)?
I think there were certain conditions that had to be met but can't for the life of me remembering any of it.
Cheers in advance
JT
Sorry I've made an error in the cost calculations I need to re-do the calculation later as I've assigned all costs to oil & some need to go to the nat gas side of things :( :( :(
LOTM
Just topped up another 5,250 shares at 155.17p but deal is not showing on the LSE unlike the last one, so either its being held back or it occurred on one of the other platforms.
LOTM
Even with the health profit margin we're currently enjoying of rough $40 a barrel ($89+ for Egypt oil - $49.83 of OPEX, deferred payment & G&A) & gradually increasing production, that level of income will no-where near cover the amount of money being invested in the ground this year in Egypt ($120M).
2024 will be the inflection point.
If production starts the year at roughly 7,000 bopd & the oil price maintains its current level. Then we should be seeing a healthy margin of over $50 a barrel ( $88 - ($13.00 + $9.60 +$13.45) )
That equates to over $350,000 net per day.
If development capital is set around $80M for 2024, that equates to $6.66M a month or roughly $220,000 per day. Even if they went as high as $120M again that still comes in at roughly $330,000 per day.
So we would be doing better than break-even from day 1 & as production continues to increase gradually during the rest of the year, we would be able to bank more & more cash daily (assuming the oil price was constant which it won't be).
Even taking the daily margin at $20,000 that works out at $7.3M for the year, then add in the nat gas for another $3.5M & you're looking at over $10M that can be distributed in dividends. By then we should be down to under 110M shares in issue so close to a dividend of $0.10 per share, plus the distribution from the Waldorf assets in late March which is likely to be in the region of $50M. Lets say they use $20M for additional share buy-backs & pay out the other $30M. That would mean a total dividend for 2024 of close to $0.40 a share !!!
LOTM
Mr.kioto
That depends on whether the big institutions want it to trade freely or are still building there positions in the company.
What the company has said about production levels for the rest of 2023 & beyond.
As well as the news on the $100M dividend & when the share buy-back is going to re-start.
LOTM
So where is the current break-even point for Capricorn if we leave nat gas production to make that tiny profit per day ?
OPEX is $13.00 per barrel.
The extra deferred consideration payment to Shell of $25M that will need to be paid in Q1 2024 for the Egypt assets.
So you can say its just over $2M per month, or on a per barrel basis its $11.41 ($25M / 2.19M) assuming production for the year averages the 6,000 bopd they projected.
Please note production is very much biased to the 2nd half of the year so if you split the $25M in 2 & assign $12.5M to each half of the year & then divide that by the production for that half year my estimate is that the cost was around $13.80 in the 1st half.
G&A cost next
Total is expected to be around $70M for 2023 falling to just $35M next year (which is something people really need to grasp going forward).
Again you can either assign it per month $5.83M or by a barrel $31.96 (ouch) & again if you want to weight it to the production profile it was probably around $38.80 in the 1st half of the year.
Just as an aside looking ahead if we were to say production was 6,000 bopd in Jan 2024 (the average expected for 2023) then the G&A cost for that month works out at just $15.68 per barrel & if its 7,000 which is where I expect it to be if not higher then the figure falls to $13.45 per barrel.
So for the 1st half of 2023 we're looking at costs of $13.00 + $13.80 + $38.80 = $65.60 per barrel.
For the year as a whole $13.00 + $11.41 + $31.96 = $56.37 per barrel
For the 2nd half of 2023 approximately $13.00 + $9.70 + $27.13 = $49.83 per barrel
As you can clearly see there isn't a lot of profit margin between $77.75 (the average price of our Egypt oil in the 1st half of 2023) & our costs of $65.60 per barrel.
And that's before you write of the cost of the Mexico well $30M (which wipes out another $13.50+) or take account of the $120M of drilling in Egypt for 2023.
LOTM
Any chance share price will jump after the call?
I wasn't intending to buy any more shares, especially ahead of the half year results & webcast on Thursday.
However given the silly price they were just offering I just bought another 6,750 shares at 158.98p
Maybe someone isn't watching the price of oil & the direction its being going for the past 6 weeks!
$$$$$$$ in the bank daily
LOTM
Well so far in Sept the price of Brent oil has averaged roughly $90 a barrel which means the company is receiving roughly $88 a barrel in Egypt.
We should be producing a net amount north of 5,500 bopd by this stage, possibly getting close to 6,000 net bopd. However I'll use the lower number for now.
So revenue earned over the last 10 days is $4.84M (10*88*5500) less OPEX of $0.715M
(10 x $6 per barrel to be safe x 2.1685 (the ratio of our share of production compared to the WI costs that we need to cover).
Therefore we've made over $4M in those 10 days with only really G&A costs to come of that figure in cash term & an allowance for Amort & Depreciation of the asset from "finding" it cost.
In oil terms our true OPEX costs are around $13 per barrel & we are currently making around $400,000 a day net.
The Nat Gas terms seem to be slightly different as the cost ratio works out at 2.6992 (call it 2.7) on the figures the company presentations give.
So on production of 7300 boepd we're getting revenue of around $118,500 a day (5.6*$2.90*7300) with OPEX costs of $108,405 ($5.5*7300*2.7). A mere $10,000 a day profit unless the price of gas is index linked to inflation since last year.
Certainly not worth the effort in monetary terms that's for sure, but they do get some liquids production with the gas & some gas will be used for power production etc.
That explains precisely why they are targeting liquids production.
LOTM
HarrierResearch,
So I've basically got the 2nd half of this year kind of neutral, with that $140M of expenditure matched with around the same sort of level of cash inflow from Egypt.
Now some might think that's not a great outcome, but there failing to see the turnaround that will occur in 2024. When that $340M of expenditure is immediately cut by $90M ($35M from G&A, $30M non Egypt exploration & $25M share buy-back).
On top of that your production levels are much higher than they are now, so I'd expect next years exploration, development & production expenditure to be lower, maybe in the $80-100M range. So that would be another $20 - 40M to take off this years expenditure number. While at the same time revenue from Egypt is far higher, especially in the 1st half of 2024 than it was this year. Plus we'll be getting a healthy payment from Waldorf as well.
LOTM
Hi HarrierResearch,
Lets see, $25M to Shell for the max earn-out on the Egypt assets, $13M for the share buy-back, $40M G&A expenses, given that they will likely have to front load some of the severance payoffs to staff, $30M for the Mexico well, $60M for D&P drilling in Egypt ( half the expected amount for the year there) & finally $35M in OPEX costs.
I've got the 2nd half at $140M (assuming they spend the other $12M+ on the share buy-back during that period) which doesn't include the next special payment to shareholders.
LOTM
How did you come to your estimate of $203m for expenses for the half year? That seems outrageously high, even as an estimate of annual expenses.
I've been crunching some numbers ahead of the half year report.
There estimate for 2023 production in Egypt is for an average of 6,000 bopd & 7,021 boe in nat gas.
The 2022 actual numbers were 5,028 bopd & 7,941 boe in nat gas.
Given production was on a decline throughout 2022, that decline would have continued probably until the start of the 2nd quarter when the 1st of the new development wells would probably have come online, which would have stabilised the rate before it started to increase as more & more wells are added in.
Therefore I don't think oil production will have averaged above 4,750 bopd during the 1st half of the year. Or around 860,000 BO in total.
Average price of Brent for the 1st half was $79.75 & therefore the realised price in Egypt is thus around $77.75
So gross oil revenue for the 1st half should be around $66.5M with an additional $12M from nat gas.
I've estimated total outgoings to be a hefty sum of around $203M for the 1st half plus the $449M that was paid as a special dividend to shareholders.
So we should be looking at a net cash balance of around $157M assuming receivables due $97M & overdue amounts of $66M are roughly unchanged from the end of December.
I am being conservative in the above numbers so hopefully the actual results top these numbers.
Right now we should be entering a fantastic scenario where rising production and increasing oil prices are really increasing daily revenue substantially.
Oil revenue in the 1st half was around $360,000 gross per day on average. Today its probably around $460,000 & if the price of oil remained constant it would be north of $560,000 in late December (possibly close to $600,000 even).
All of which makes a massive difference to the bottom line.
LOTM