Thread12 Oct 2020 12:55
It seems a thread has been deleted, possibly because of the threats in some of the posts.
The start was a post by Oilman Jim: he said that NTOG would never make any money and that companies nearby were going bust etc...... He was stating that at best NTOG would make $10 a barrel.
Analysis:
Either OMJ is taking the sales price of NTOG's oil to be around $38 per barrel because he ignores the hedges or he is taking the hedges into account and the average price is around $46/$48 a barrel. If he is is stating that at best NTOG makes $10 a barrel then he is stating that the opex (the cost of producing a barrel) is either $28 or $36/$38.
I think he is well out on both numbers but lets suppose he is right: why would Cypress be spending $800k on a new drill and carrying NTOG for $200k? Remember that the opex is the cost of producing a barrel not the full cycle costs which include capex, overhead and P&A? If the opex cost is $36/$38 why would Cypress spend $800k knowing that they will barely break even on opex costs and will certainly lose money on the full cycle costs?
I think that the answer is that the opex costs are well below $36/$38 and below $28 a barrel.
Where OMJ is correct is that carrying the PLC overheads is a heavy burden on marginal assets, which is why getting to PLC break even is such a big event. Once, NTOG and any other quoted company gets to PLC breakeven it means that any fund raise is for new assets or being put in the ground.
Once these three current gigs are sorted, Cypress drill, Permian Workover and Caballos geological study and development plan then NTOG should be at PLC cashflow positive and maybe PLC breakeven. That would put NTOG in a very good position going into 2021.
PS I expect we will get the spud announcement from Cypress sometime next week.
DYOR
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