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HY,
Looking forward to read WRL’s explanation, although saying that, my expectations are rather low on this point....
But as a quick comment:
- isn’t it rather strange that the company keeps mentioning “net payment to Wenworth” in every monthly payment update, and this now turns out to be a gross figure? Also highly coincidental of course that the difference between gross and net is 3.1 mln, exactly the same as the last payment in June...
- the 4.344 mln due to M&P on 1 Jan must include something more than only the “cash call”, as the “cash call” balance itself was 3.55 mln, according to the 2017 annual report...
But I found a small new positive comment as well by the way:
“At June 30, 2018, the Mnazi Bay joint venture partners were owed six months of gas sales made to TANESCO, with $1.18 million owing to Wentworth of which $0.84 million representing five month of gas sales has been collected subsequently to June 30, 2018”
So total payments subsequent to 30 June were 10.1 mln. With 3.1 and 3.7 mln already announced, I now expect a very decent payment of 3.3 mln in the 1 Sept announcement.... The only trouble is: if it turn out to be correct, some comments in the H1 start to feel pretty dishonest...
Hi Mick and Mikkel,
I missed your interesting discussions on Monday as I was travelling. I have also asked Katherine for further clarification regarding opex and cash calls from the operator. In the mean time, I will try to explain my take on the issue. The difference between net and gross payments from MP were about 3.1 MUSD and were cash calls for opex. My view is that cash calls includes WRL's share of CAPEX as well, although it does not say so explicity in the report. Furthermore, when I look at page 11 note 5 (TPDC receivables) in the financial statement, I see that the receivables have increased by 0.538 MUSD as WRL has paid for some of TPDC's concession costs. When summing up these items, the implied opex cost for WRL is about 1.0 MUSD for the first half of 2018.
MUSD
4.344 (Balance due to MP at the start of the year)
0.683 (WRL's share of Capex during the first half of the year)
0.538 (TPDC's share of concession cost paid by WRL)
1.022 (Implied opex based on these numbers)
-3.1 (cash calls during first half of 2018)
3.487 (balance at 30 of June 2018)
Let's hope WRL will return shortly with the full explanation, so we don't need to speculate anymore
I'll do, and i very much agrees Mick
WRL’s own P&O costs were 3.48 mln in 2017, so that could be the same number as in the CPR....Please keep me posted Mikkel, I’m very curious to hear how she explains this, and obviously, I hope that I am wrong....
If I’m not, and it is an additional cost currently only really visible in the liabilities, then the company should end all confusion and include “share of Mnazi Bay operator’s operating costs ” in the P&L statement...
Thanks Mick for the reply, I've passed along the question, and specifically asked to clear it out in a more layman term. How ever, the total OPEX for 2017 is clearly stated in the CPR issued this year, and thus theres no doubt that Mnazi total OPEX 2017 was a little under 12 m$, and our share clearly only represent around 3.7 m$/year. These cash call numbers may or may not (I certainly hope so) include either a part of our G&A who may be related to the joint venture, or it's some kind of TPDC cost and later receivables.
It's still stands as a big question mark, but it'll keep digging. It will certainly surprise me if we incurs that kind of oper. cost.
In light of this discussion, here’s a list of previous comments the annual/quarterly reports regarding the cash call. Based on a cash call of 4.1 mln for 9 months in 2017 and 3.5 mln for 6 month in 2018, the average cash call is 5.5-7 mln per year, or 450-580 k$ per month... Luckily the company can significantly reduce costs: (1.2 mln $ per year interest, > 1 mln annually for tie-in Capex, 1 mln G&A?), but this cash call remain a money drain unfortunately.... 2016 annual report: “Current liabilities include outstanding cash calls to the Operator of the Mnazi Bay Concession of $6.5 million. A total of $1.0 million has been paid in 2017 and the remaining $5.5 million is expected be settled through a combination of cash receipts from existing gas sales receivables and funds from a new working capital facility“ Q2 2017: “Current liabilities include outstanding cash calls issued by the Operator of the Mnazi Bay Concession for $3.49 million of which the Company settled $0.63 million subsequent to June 30, 2017. The remaining $2.86 million is expected be settled through a combination of cash receipts from existing gas sales receivables and funds available through a new overdraft facility which was concluded during the second quarter of 2017“ Q3 2017: “Current liabilities include outstanding cash calls issued by the Operator of the Mnazi Bay Concession for 2016 operating cost of $1.26 million of which the Company settled the full amount subsequent to September 30, 2017. The Company’s share of accrued Mnazi Bay activities for the nine months of 2017 was $4.10 million which is expected be settled through cash receipts from existing gas sales receivables“ 2017 Annual report: “Current liabilities include outstanding cash calls issued by the Operator of the Mnazi Bay Concession for 2017 operating costs of $3.55 million. Subsequent to year-end, the Company has settled $2.35 and expects to settle the remainder during Q1 2018.” 2018 H1: “Current liabilities include outstanding cash calls issued by the Operator of the Mnazi Bay Concession for H1 2018 operating costs of $3.49 million. Since June 30, 2018, the Company has settled $2.66 million”
Hi Mikkel,
Thanks for the compliments, and good to hear that somebody else has been pondering about this as well.
Hmm....
As a short answer: I am in the same position as you: I’m still confused about this issue and I can’t make my model match the reported numbers.
As this is a public board I need to be a bit careful about the rest...
Unfortunately I don’t find the answers that I get from Katherine about this issue “particularly satisfying”...
It seems that this “cash call from the operator” is clearly not taken up in the P&L statement. It is only carried forward in the statement of assets and liabilities, and if I’m not mistaken, it is simply added to the curren liabilities at the end of a reporting period (6 months now)
While I have always believed that 2018 would be a year of reducing liabilities (so reducing debt + other payables; note the 17.3 mln current liabilities on 31/12) and NOT about cash build-up, these newly added “cash calls” slow down the drop in liabilities.
The impact is significant: we will be reporting very healthy profits, but at the same time, liabilities will drop only very slowly, while cash build-up will keep disappointing. (You can forget about dividends until 2021 I suspect...). A strange consequence of this is also that at lower flow rates the company could be reporting profits while the financial position actually deteriorated....This risk becomes even greater when the TPDC long term receivables finish.
I think that the company could be a lot clearer about this.... it almost feels like a case of creative book keeping like this.
The only good news is that nobody will really care, as long as flowrates keep growing... Also, I think my earlier break even guestimate, in case you add costs of 3.5 mln every six months, was too pessimistic (I think it is around 75 mmscf/d)
Hope this helps a bit. Please also keep questioning Eskil & Katherine about this, I’m very interested to get a full explanation!
Good luck!
Hi Mick,
Preciate very much your thoughtful thoughts and lately very interesting questions and replies.
Regarding those cash calls, I've tried to figure those numbers out literally the most of the weekend, and time and time again it doesn’t add up, at least not to my understanding and what I could learn from the CPR and past Q/Y reports. It seems like you’ve got an idea about these cash calls and how they relate to our part of OPEX cost and possibly (I think) part of our G&A who may or may not be included in those cash calls, and thus a part of the Mnazi joint venture operation.
According to the latest CPR the total 2017 OPEX cost for all Mnazi field was around 11,8 m$, and thus 3,7 m$ net to WRL for our share of operating and production cost, and what I can’t wrap my head around is that we’re being charged 400 – 450 k$/month, ~5 m$/year in cash call, as opposed to the ~3-3.5 m$/year stated in the financial report which as well match quite nicely with the stated OPEX in the CPR budget.
So, either it’s 1 a question about we’re carrying some joint venture related cost in our G&A expenses, and thus the cash calls don’t seems do add up with production and operating cost?
Or 2, Mnazi Total OPEX has increased to around 15 m$/year, and thus the cash calls on our balance sheet and the operating cost in our financial statement are not at all related, and we therefore incur both these cash calls, and also some prod./oper. expenses not related to the joint venture.
A last third thought I can think about is that these cash calls include our share of TPDC, and therefore we pay 40% of oper. cost upfront, and afterwards receive them back from TPDC through receivables.
It’s probably neither of those stated, and I would therefor appreciate if you were able to enlighten me, because I really can’t wrap my head around this question.
Financial statement is clear about Production and Operating cost for 1H2018 of 1,47 m$, as opposed to the stated cash call of 3,49 m$ also for operating cost. Seems really odd.
Sorry about the long write, it sums up quite nicely how confused I’ve been.
Thanks Mick
Best regards Mikkel
I did indeed receive an answer back from WRL (I remain very impressed by their openness to questions from PI’s!)
The key issue is regarding the payments, and also explains the cash call:
“$16.1m is the gross number, $12.9m is the net number actually received and transferred to our accounts. $3.5mm was retained by the Operator in settlement of cash-calls. The Operator , M&P, cash-calls the JV partners for any and all opex. The net amount is around $400-450k/month,
While the numbers don’t add up exactly, it shows the mechanism.
For estimates of future performance, I would deduct 20% from the gross payments.
The company should still do very well, starting at rates around 100 MMscf/d....
HY,
The cash call is certainly not for capex..... it is for the 2018 operating costs, so M&P’s Opex, and it is addition to WRL’s own operating costs. It shows by the way how incredibly important it is for WRL to reduce costs. Once the TPDC receivables stop, WRL could even struggle to pay these cash “calls”, if production is too low.....
The only thing that will solve all of this, is to ramp up production further... Luckily, I do expect that to happen in the next 12 months.
The cash call could of course include WRL part of CAPEX during the period, about 0.9 MUSD during this period, if I remember correctly. Capex is not included as a cost in the PL , just depreciation.
mick2020,
I agree it sounds a bit strange, but if it had been a cost, the same number should have been found in the profit and loss statement as well. Please post any reply from the company about this issue.
Highyield:
See page 15 of the MDA: “Current liabilities include outstanding cash calls issued by the Operator of the Mnazi Bay Concession for H1 2018 operating costs of $3.49 million. Since June 30, 2018, the Company has settled $2.66 million“
This “cash call” liability is added in every report I’ve seen so far (annual or 6 months), and I strongly suspect/ fear that this is simply 32% of Maurels operating costs in Tanzania. This is indeed my main concern, I used to think that this was only for past operating costs. We basically keep adding 550-600 k$ to the current liabilities, each month. If you add this amount to the balance, we may only break even at ~90 MMscf/d.....
The exact date of the June payment is a non-issue of course, and can artificially improve the H2 results ( receiving 7 payments in 6 months), even though such atttempts to make the numbers look better annoy me very much.... (in the presentation, and again today, with the statement of three payments post H1)
Mick2020,
Regarding your point 4, I am not sure what you are referring to. I find a liability of 3.5 MUSD towards MP,down from 4.4 MUSD at year-end, but that is not a cost for the 6 month period.
"4) Why do we keep incurring cost for “cash calls by the operator for operator costs”? 3.5 min for the first 6 months in 2018, a hefty sum. If we have to keep paying 550-600 k$ per month to Maurel for this indefinitely, then WRL will struggle to ever make any serious money I suspect, or at least not below 100 MMscf/d."
Regarding your first question, they have concluded on Norwegian forums that payments for June was received July 2, and therefore has to be reported in H2.
I do not disapprove your disapointment, I was just curious :-)
Alph, 1) the corporate presentation from 16 July showed 6.3 mln cash on 30 June. Why has that number now been reduced to 4.04 mln? 2) adding up the monthly payment for the first 6 months of the year, we should have received 16.1 mln. That sum now turns out to be only 13 mln. Looks like we didn’t receive the June payment in June, but in in July. 3): 3 monthly payments since 30 June. Sure, that is for June, July and August. No news therefore 4) Why do we keep incurring cost for “cash calls by the operator for operator costs”? 3.5 min for the first 6 months in 2018, a hefty sum. If we have to keep paying 550-600 k$ per month to Maurel for this indefinitely, then WRL will struggle to ever make any serious money I suspect, or at least not below 100 MMscf/d. 5) Total liabilities have dropped by a meagre 1.33 mln even though we reduced debt by 2.7 mln. 5) We keep hearing that the Mnazi Bay tie-in has been completed, but yet again, we spent another 683 k$ capex on it, in the first 6 months. I asked Eskil directly for comments on this; very curious if he will respond..... So what did you think of the numbers? Only at 130 MMscf/d and beyond this becomes a cash cow, if we continue like this.
What in particular do you find disapointing?
Dissapointing, even without the one-off costs.
2019 then?
http://www.lse.co.uk/share-regulatory-news.asp?shareprice=WRL&ArticleCode=9s7o52h9&ArticleHeadline=Wentworth_Resources_Limited__Half_Year_Financial_Statements_and_MDA
Malcolm today. WRL from about 16:20
- Eskil is a 'very very smart cookie' and a fantastic hire for Wentworth
- He's not going to go there and not do anything
- Fantastic play (Mnazi Bay) Shareholders should be very happy in terms of what is going to happen here. Lots of upside potential.
- Tembo, huge potential, Mozambique is short of domestic gas, assess commerciality, little competition - and also zero exit cost.
- Agrees on the third leg. Wouldn't be surprised at some stage to see them doing a deal for a bit of production in a good environment.
- Katherine knows the business very well and is highly experienced.
- They've got cash, reducing debt, looks interesting.
https://audioboom.com/posts/6959402-ascent-resources-ast-and-malcy-on-solo-wrl-aex-iog-amer-hur-genl
Great start of the second half of the year: Production increasing, payments increasing, what more do you want... well... OK, it should have happened in 2016 already... ;-) Anyway, all looking good right now Those outstanding liabilities will melt faster than snow in the sun this year: 17.3 min current liabilities (1 Jan) will be gone by the end of the year, and cash is already building up! ————- The Company is pleased to inform shareholders that payments received during July 2018 for gas sales generated from the Mnazi Bay Concession in Tanzania totalled $3.7 million net to Wentworth. Payments were received from both Tanzania Petroleum Development Corporation ("TPDC") and Tanzania Electric Supply Company Limited ("Tanesco") for one month's gas sales to TPDC and one month's gas sales to TANESCO. The Company is also pleased to report that gross production volumes during July 2018 from the Mnazi Bay gas field averaged 90 MMscf/d.
Not that anybody cares, but it all looks extremely encoraging! Can’t wait to see the H1 results. I expect a net profit of ca. 4.5 - 5 mln $ for the first 6 months; a very good “start” for such a small company (P/E ratio < 7!). However, it will get truly exciting once we hit 100 MMscf/d.... and conpletely unbelievable at 130 MMscf/d!! This time next year?
http://hugin.info/136496/R/2205292/856740.pdf
LOWER COST PRODUCTION
• 81 mmscfd gross (Mnazi Bay) ca.4,300
boepd in Q2 2018
• Low cost. Long life reserves (2031)
• 45% of Tanzania’s Domestic gas needs
• Demand growth increased by 166% since
June 2017
REGULAR REVENUE PAYMENTS
• $16.1 MM paid year to date*
• Deleveraging balance sheet
UPSIDE POTENTIAL
• Unlocking Mnazi Bay reserves
• Tembo Mozambique gas discovery
SIMPLER & CHEAPER STRUCTURE
• Re-Domicile and transition progressing
through Q3 2018
RPS Canada updated CPRs for Mnazi bay and
Tembo (Reserves & Prospective resources) expected Q3 2018
Dangote Cement CNG – 8 mmscfd starting Q4
2018
Kinyerezi II (240MW)
− Six turbines commissioned between
December 2017 and September 2018
− Max Demand from facility 35-38 mmscfd
Notes from a 30-minute call on June 28th with Eskil Jersing, Wentworth Resources Limited (WRL’s) CEO.
In conclusion: The new CEO has a well thought-out development plan in mind for WRL. A follow-up sit-down meeting with the CEO and the Norwegian retail investors is being planned (…and we should ask for this to take place sooner rather than later). Eskil is open to a continuing conversation with and will listen to shareholder groups. I believe (moreover) that he will take requisite actions to create value for the company and its shareholders. I suggested that the sooner we see a bump in the share price the more comfortable and supportive shareholders will be. WRL’s share price dropped some 10% since the AGM; not the bump we had expected. Lastly, the Company intends to put an IR (Investor Relations) Pack (in effect a corporate presentation) out in the near term to update the shareholders on ongoing efforts in this new chapter of Wentworth.
Here are some highlights (my takeaway and interpretations from the conversation):
1: Unlock Values: Wentworth is a solid company, but there are many complexities. The market needs an update of value. The Mnazi Bay Concession, WRL Tanzania (alone) is worth (at least) some $150 million and (just for Tanzania) we see how undervalued the company is. Efforts will be made to reduce the gap between the company’s (book) value and (stock) market value, i.e. a valuation reset. There is a recognition that Wentworth’s communication with the market could have been better.
2: Significant resources: Wentworth has good relationship with all stakeholders in Tanzania. To develop this 'resource platform' further, WRL will need fresh capital, which reinforces the need to achieve a higher (a re-set) value of WRL; nobody benefits from a low (market) valuation of the company; a strong balance sheet reflected in (stock) market appreciation is essential.
3: Mozambique: The one-year extension that has been granted, but there are concerns about the security risk. WRL’s Mozambique assets are good, but the company will not proceed with drilling without a risk-sharing (farm-in) partner and is 'looking at solutions' for this.
4: A Third Leg: Looking (opportunistically) for a third leg (in addition to Mozambique and Tanzania) that will help grow the company and offset the (current) risk exposure.
5: Corporate: The Company realizes the need to sit down with the (Norwegian) retail investors (will visit Oslo soon). It was my understanding that there had been some contact with this group with concerns been voiced and noted by the CEO. The Oslo de-listing is part of an (ongoing) effort to cut costs and create better liquidity in the stock (I’m not sure how focusing on London AIM will achieve this). There is talk about “simplifying the corporate structure and creating a cheaper (less expensive) operating platform”. There will be a planned and gradual process towards putting in place new board of directors structure over the next
Another excellent RNS! And, again, zero response on AIM.... hmmm.....
Wentworth, the Oslo Stock Exchange (OSE: WRL) and AIM (AIM: WRL) listed independent, East Africa-focused oil & gas company, today provides an update to shareholders.
The Company is pleased to inform shareholders that payments received during June 2018 for gas sales generated from the Mnazi Bay Concession in Tanzania totalled $3.1 million net to Wentworth. Payments were received from both Tanzania Petroleum Development Corporation ("TPDC") and Tanzania Electric Supply Company Limited ("Tanesco") for one month's gas sales to TPDC and one month's gas sales to TANESCO.
The Company is also pleased to report that gross production volumes during June 2018 from the Mnazi Bay gas field averaged 87 MMscf/d.