SSN 0.00% 1.5¢ samson oil & gas limited

Hi Rob, Clearly we diverge on certain issues. One area where we...

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    Hi Rob,

    Clearly we diverge on certain issues. One area where we agree completely is the level of disclosure in a 10Q, much of which flows to the Qtrly and some key items do not. That is solely attributable (IMO) to SEC rules over the what ASX requires. So with SSN you can make far more informed decisions than say with AKK or NSE for example. Same holds for LNR & SEA.

    Two items worth shining a torchlight on (already put the floodlight on debt & EBITDAX) are:

    1. Hedging.

    I'm not following where you're thinking no gains from hedging during the Qtr. They noted a gain of almost $373K and state derivative contracts settled monthly. The part I struggle with is that impact of settled hedging added only $0.32 to the realized price received??

    Going forward I see just 4,403 BO hedged at swap of $105/Bbl (if SSN produces same amt of oil that's just 7.25% of production) in Dec Qtr. They have 27,600 in 3-way collars in Q4 (so around 45%). Assuming these are std WTI contracts. Also assume the sub-floor doesn't apply (WTI @$32.50 - gof I hope not) so all Bbls sold at a minimum of $45.

    For me, that level of hedging is not sufficient. I do note that TB concedes this as it is reported that the company is seeking to increase derivatives as production increases (??) to provide downside protection to said production.

    2. I simply don't get the purpose of "production cost" (or lifting cost?) which is just LOE+Prodn taxes. What use is there to ignoring G&A costs. I'm also all for adding in any interest costs into the Cash Margin calculation (else those with large financing costs .... e.g. LNR for me on ASX and say EXXI on NYSE are getting a free ride in comparison).

    I want to know how much money is left over after paying all the cash costs to get the stuff out of the ground and sold. Also why I like to see the cash margin pre and post hedging (as that can easily change the dynamic).

    Overall I agree that the more oil left in the ground the better for the long term - if you're EOG/COP etc - but some companies have to produce cash flow to meet covenants and pay interest bills and dividends, even if there is basically nothing (or worse a negative) left over.

    As you say risk is a personal choice - I've got plenty of it in my portfolio some of which I thought of as not that risky at the time of purchase.

    GLTA
 
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