Member Info for rossannan

steward1

In this market why wouldn’t you focus on cash burn and ignore the end of the rainbow stuff?

The key question may be whether Steeldrum was the answer to CERP’s cash burn. Have CERP bolted on some kind of cash cow?

I think the answer to this Question to the Team -

“Will Steeldrum make a tangible difference to the bottom line? BOPD may increase marginally but so will costs/overheads?”

was telling -

“We believe Steeldrum has the potential to make a tangible difference to the Company’s bottom line.”

This choice of words suggests to me that while Steeldrum may have the potential to be a cash cow, it is not an immediate answer to the cash burn problem.

steward1

I’m not way off the mark, I’m just looking for clues at the scene of the crime.

Back in June I was more open minded about cash burn:

“The graph from the December ‘17 presentation did foreshadow some of the stagnation that we now appear to be expecting from Q2 production. As long as the bank balance doesn’t show evidence of cash burn, the story will still be broadly intact, even if it turns out that production has stagnated somewhat.”

In July though there was an RNS with a major red flag in it:

"In taking this action, the Executive Directors and Executive Management members wish to continue to align themselves with the Company's shareholders and also reduce the Company's cash burn, thereby enabling these funds to be invested in other value-adding business opportunities."

Since then the evidence has accumulated, with $4.1 million at the end of Q1 becoming around $2.4 million at the end of Q2 and LK then drawing a veil over Q3 by consolidating the figures with Steeldrum.

Looks like a cash burn problem to me. What does it look like to you?

Garnhiem.

Either that or you would simply rather not consider the possibility that I’m right.

Garnhiem.

How does that fund the drilling of the SWP? Or are you suggesting that all the associated share promotion will lead to a better placing price?

Garnhiem.

The danger of the bigger picture is that it distracts from the more obvious and immediate question of funding. At the end of Q3 CERP had just under $2million in the bank. What will it have in the bank at end of this year? More than $2million? You would think, given what was left over from the recent raise after paying off that debt. But at the end of Q1 2019? Investors and potential investors want to think about whether, whatever LK says, they are going to be diluted to pay for the SWP. Cash burn is the key to that - let’s see if the Team are prepared to answer the question that I posed. I note that you are not hazarding a guess at the answer.

Garnhiem.

I would argue that it keeps me grounded. Seriously, what figure do you have in mind?

Garnhiem.

No, I am suggesting that adding in Steeldrum’s cash balance masked the extent of the cash burn in the original business (as seen in previous quarters). So, for example, if the cash attributable to Steeldrum at the end of Q3 was $1,000,000, the cash burn in the original business is still egregious. On the other hand, if the cash attributable to Steeldrum at the end of Q3 was only $100,000, the cash burn in the original business is clearly now under control.

There is a world of difference between negative spin and actually trying to get to the bottom of the financial realities, but you clearly think that there is less cash burn than I do. So, in the unlikely event that CERP do answer the question, what do you think the end Q3 cash balance ex Steeldrum was? I am thinking that it could be around $1,000,000. What do you think?

For what it is worth (haven’t had one answered for ages), I have now submitted this Question to the Team:

“In your 10th October RNS you confirmed an end Q3 2018 cash balance of US$1.97 million (end Q2 2018: US$2.35 million). What would that end Q3 cash balance have been with Steeldrum’s cash stripped out?”

Hawkspear

Looks like what actually happened is that someone had my latest post removed and yours went with it because it was on the same thread. I’m only interested in talking about financial realities here. It’s a shame that others think that name calling and reporting posts is an appropriate response. If CERP hadn’t stopped answering my questions a while back, I would be asking them today what the end Q3 cash balance would have been with Steeldrum stripped out. If you want to defeat my argument that there is substantial but hidden cash burn, just ask them that one question. If they come back and say that Steeldrum only brought, say, $100,000 to the party then that will be hugely embarrassing for me as it will be clear evidence that CERP’s cash burn is in fact being brought under control. So what are you waiting for?

Scarface72

No, you just don’t agree with my take on CERP.

Scarface72

Wrong questions. End Q1 cash balance was $4.1 million, end Q2 cash balance was $2.4 million, what was the comparable end Q3 cash balance? Right question.

Scarface72

And just to be clear, if there is still significant cash burn, the proceeds of the recent raise will be pretty much exhausted by the time LK gets round to drilling the SWP. So where else is the money going to come from?

Scarface72

In a nutshell, my problem with CERP is that the Q3 figures could and should have revealed whether there was still significant cash burn but LK used the Steeldrum acquisition as an excuse to provide consolidated figures that were not comparable with the Q2 figures. This was well out of order, IMO. The fact that he chose to do this suggests to me that there is still significant cash burn.

Scarface72

When an AIM oiler has significant CAPEX in the offing and it is not immediately apparent how it is going to be funded, it usually makes sense to stand well back, particularly if the oil price is not in good shape and something like SPT is part of the equation. I am sure that a turning point will come but it is hard to see how this will not involve a further raise. More than happy to wait on the sidelines in the meantime.

Garnhiem.

Time will tell. All the spend on Goudron didn’t really produce the goods and there is no end to the spending in this business. It’s not negative spin, just realism. LK needs to sell fewer dreams and more oil.

MrMagoo31

Look at it another way - CERP had one lot of CAPEX and now it has five lots of CAPEX. These are not fields that are throwing off money - it all still looks pretty marginal out there. That is the real problem - LK never really got the money wheel turning so it looks more likely than not that CERP’s initial foray into the SWP will be preceded by another placing. Unless, that is, LK comes clean on funding and takes the LIND money while he still can - that might be just enough to get him to a turning point.

Are VSA going to have to say “We have adjusted our risked valuation in order to reflect the impact of increased share capital from ... the recent fundraise” one more time before any drill starts turning in the SWP? That is the question.

ColonelDrake

Big drill? Do you mean a standard Trinidad well or a properly deep 10,000 feet plus well?

and on how it is funded...

Scarface72

“How many years of posts are you prepared to write to get a 2p buy in...”

That old chestnut! None of the skeptical posters imagine that anything they post has any traction on the share price. That would be delusional. Nothing can be done about the share price, for good or for ill, on here. There was a time when the waves of ramping seemed to have some effect at least, but the market is more wary these days, including of LK.