Dross - Schoolboy Error!26 Dec 2018 01:17
Irene - You like to take a keen interest in CERP financials and seemed impressed by Ross’s presentation last Sunday at 15:50 ‘ As I have said before, the figures in CERP’s published accounts illustrate how significant lower WTI over a sustained period can be for CERP - I compared 1H 2018 with 1H 2017.
Average realised sale price for Goudron operations in 1H 2018 - $61.17 per barrel, netback per barrel $13.13.
Average realised sale price for Goudron operations in 1H 2017 - $46.28 per barrel , netback per barrel $5.69. ‘
Ross has made a deduction from the above figures without taking account of the production figures over the periods involved - schoolboy error - because CERP Goudron is an IPSC the financial terms for which are detailed in the CPR on CERP website. In simple terms the netbacks are volume related.
The first 40 bopd earn CERP $9 per barrel gross, the next 111 bopd earn a WTI related low base rate so it’s only barrels over 151 that earn the premium rate. In 1H 2017 production was only 354 bopd so more than 40% earned at sub premium rate whereas in 1H 2018 production was 485 bopd so sub premium was just over 30%. In Q3 2018 the production was 735 bopd so sub premium would be circa 20% of total !
Using the CPR figures I calculate WTI @ $46.28, with no SPT, yields almost $4 per barrel more on prime rate than WTI @ 61.17 with full SPT !
@ WTI $42 mentioned in your last post Irene the prime rate netback would be circa $3.30 less than the $46.28 rate.
I’m not claiming reduced WTI is great for CERP as there is negative impact but under the IPSC it is a lot less than most people expect and that’s why I have bothered to post because trolls like to mislead readers here about WTI significance!
Whilst talking about accounts I noted that 1H 2018 actually showed a gross profit, before depreciation, of £879,000.The loss for the period, however, was close to £2,000,000 after taking Spain and other factors into account. Looking to the future there are likely to be continued large deductions as this is a growing company but on the positive side the increased production from Goudron should make a substantial difference to the top line, for example if H2 2018 shows Goudron average 735 bopd this is 250 bopd more than H1 and @ WTI $50 this would increase revenue by around $1,365,000 for the half year.
I strongly recommend readers have a look at the CPR figs for themselves- the basic Royalty deductions are relatively straightforward but the other fees are a bit involved - NR told us that at $50 WTI the netback @ prime rate was circa $30 per barrel which suggests the overall deduction for the non Royalty fees is around $8.75 per barrel but if anyone wants to argue a different figure I’m all ears!
ATB to all truth seekers out there !
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