Ann: LNC Oil and Gas Division Results for Third Q, page-7

re: Ann: LNC Oil and Gas Division Results for... Positives are:

(1) It confirms all the Revenue in the quarterly report was oil Revenue.

(2) It did make a profit from the oil for the third quarter.


Negatives are:

(1) Year to date although it has made $1M NPAT out of oil it spent a lot net cash doing it causing a $109M net cash burn(which did include Alaska).

(2) Current bopd as at 31 dec 2012 was 6307 Gross or approx 4667 net.
The average for the third quarter was 3793 net which is a substantial fall from 31st Dec 2012.
As this is an average the actual bopd at 31 mar 2013 is likely to be even lower.
Even using the average that means bopd dropped 19% in the quarter.

What this means is the depletion rates on new wells are very high. ie If a new well starts producing at say 300 bopd it will quickly decline to below 240 bopd and keep dropping.

So basically to maintain production at current levels they will have to keep spending a lot of money drilling new wells as the old well production rates decline at fairly high rates.
This will continue to have a major impact on Cashflow.