I think your question about short-term revenue growth (and therefore better cash flow) is a good one.
Lets for a second forget about any possible asset sale, adani royalty cash or securitisation (surely this must have been considered), the GCL injection, or some other deal.
It also means ignoring spend on exploration and development, for now.
Lets just focus on current operations. So that means US Oil. Obviously there has and continues to be money spent on additional development and exploration with respect to US Oil but lets also ignore that, for now.
The reality of a business with the growing complexity of Linc means there is a growing 'admin' overhead. We'll also ignore this... briefly.
So just current US Oil operations only. Lets assume $100 oil price, and production costs of 35% with no scale improvement.
In the recent Dec and Mar quarters Linc averaged just under 2,000 (net) barrels a day. So going forward 2000 seems a reasonable base rate assumption. 2000 net barrels at $100 = $200,000/day. 90 days in a quarter = $18m revenue. If 35% of this is production costs then prod costs = -$6.3m. So a profit from production of $11.7m (which roughly ties to the Mar quarter... ignoring the required hedging).
The big question of course is will production increase and at what cost? (I hope it does and I hope it doesn't cost much... ). But just for interest sake... here's the results for 4000BOPD net, and 6000BOPD net with the same assumptions. Realisticallly you would expect the 35% to fall... but who knows.
2000 BOPD = Net production profit per quarter = $11.7m 4000 BOPD = Net production profit per quarter = $23.4m 6000 BOPD = Net production profit per quarter = $35.1m
And that is how operating revenue will increase. On top of this obviously is Admin costs ($25m a quarter) and exploration and dev costs that could be anything but likely to also be $20m to $25m a quarter.
I note that end of year target is about 4000 BOPD net... which would certainly help move things in the right direction. The enhanced oil recovery concept is also interesting... although I would be reluctant to associate much value to this until we saw solid results and understood costing.
Anyway... interesting times.
LNC Price at posting:
68.5¢ Sentiment: Hold Disclosure: Held
