I think you are right to look at statement of cashflow but you seem to be mixing it with the P&L: where do you get the US$76m loss from? I saw US$105m in capex and dev (net of acquisitions) for just over 8 net wells vs $76m in earnings before DD&A, Tax and interest. they guide ~4net wells this Q and flat production. Suspect you might see cash outflows met by cash inflows this H ie 2x $76m in EBITDA vs US$150m in capex. In fact if you bother to plot the historical difference between capital outflows versus operating cashflow for the Company, you will note that the differential is narrowing. So clearly historical capital sunk is generating free cash that (notably for this H) services capital spend and will surpass it next year at the rate the company is going.
Have you given any consideration to the concept that perhaps each well is in itself a development? That - as will likely be alluded to by the Jun H - sunk capital has been already recovered on the wells drilled more than 12-18mnths ago? and thus how does this differ any from a conventional field ie capex upfront, cashflow to recover capital then free cash flow?
Your comparison with Chesapeake is farcical - completely different business model ie grab land irrespective of geological/petrophysical due diligence or consideration of raw commodity > gear the bejesus out of it then hope for the best! Versus a focus high liquids yield producer with operating netbacks comparable to an offshore conventional field (note opex in this case is in the order of $25+/bbl versus $28/boe inc of all royalties taxes and opex).
And the premise of your argument that AUT et al continue to spend ad infinitum ignores the fundamental fact that this remains a finite resource. so as will be alluded to in the Jun H and eventually long term from next year, its an irrefutable fact that historical capex sunk will generate long free cash flow and that sum of the parts eventually exceeds sustaining capital.
might cause you to rethink your 'conventional only' world.
AUT Price at posting:
$2.89 Sentiment: LT Buy Disclosure: Held
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