Projected Revenue Looks Good

On the question of CTP's recently past, and immediately future, crude oil production, the current figures can be taken from the CTP Half Yearly Report circulated on 16 March 2016.

Note - all figures are nett to CTP unless specified.
Also note - criticisms, amendments and other observations regarding these remarks are welcome.
Note again - none of these figures offer any insight into condensate or LPG. Those products may or may not be included. I work on the assumption that those 2 are "lumped in" somehow or other.

Start here:

Production period begins 1 Sep 2015 (Mereenie acquisition date) - Page 10
Production period ends 31 Dec 2015 - Page 1
Production period is 122 days - 1 Sep to 31 Dec - see calendar
Production of crude oil Mereenie was 41,626 bbl - Page 10
Therefore daily crude production (net to CTP) was 341.2 bbl per day

So if we double CTP's 341.2 bbl per day, the total Mereenie (combined CTP/STO) crude production was 682.4 bbl per day. On the basis of those figures, it can be assumed that annual field production (inclusive of share of both JV parties) will be around 249,076 bbl. That fits with the past production figures that are available to the public through the NT Government.

The NTG's figures for Mereenie crude production for the 6 years to 2013 were 2008 - 301,000 bbl, 2009 - 236,000 bbl, 2010 - 173,000 bbl, 2011 - 184,000 bbl, 2012 - 230,000 bbl and 2013 - 195,000 bbl. For the current year to be 249,069 is hardly amazing bearing in mind that in the months of November 2013 to January 2014 we saw STO bring in at least 4 new wells before they clammed up and went into the feotal position. These were West Mereenie-19 Amadeus, West Mereenie-20 Amadeus, West Mereenie-23 Amadeus and West Mereenie-24ST1 Amadeus.

The only data that I could ever trace on those wells was the cryptic statement - "successful oil" - in one of STO's voluminous reports. It is such a big organisation, with such many and varied operations, that it does not give a lot of detail in respect of its individual fields. That is particularly so with respect to Mereenie.

So I suggest that completely reasonable to anticipate annual production (combined STO/CTP) of 249,069 bbls crude ex-Mereenie. Therefore we can be quietly confident that CTP will be earning from crude sales at the level of not less than 341.2 bbl/d or 124,538 bbl per annum. Taking that as a given I ask, the question what is this going to mean to CTP in money terms? Let's go back to the HYR figures:

Revenue from producing assets was $12,292,377 - Page 10
"30% of revenues were from crude oil sales - Page 2
Crude oil revenue is from Mereenie - Page 10
Therefore CTP revenue from Mereenie crude for 122 days was $ 3,687,713 - [($12,292,377/100) x 30]
Therefore daily revenue from Mereenie crude was $30,227 - ($3,687,713/122)
Therefore annual minimum revenue from Mereenie crude will be: = $11,032,909

This looks nice; particularly in view of the fact that there are another 3 revenue streams that the company enjoys.

The other 3 revenue streams are:

Stream No. 1 - Gas to Alice Springs Power - $6,665,000 pa. This is the contract between Northern Territory government and Magellan which we took over when we purchased Dingo.

Stream No. - 2 Gas to sales to Santos (formerly from Palm Valley) to service its customers on the pipeline between Alice Springs and Darwin - $6,345,000 pa. This is the contract between Magellan and STO which we took over when we purchased Palm Valley.

Stream No. 3 - CTP’s 50% of joint Santos–Central gas sales ex-Mereenie Field (additional to Stream No. 2) - $7,716,691.

So if we take the sales of crude from Mereenie as being Stream No. 4 we can do a very rough profit and loss analysis (don't pick on me you accountants – I cannot be sure of the correct terminology).

Stream No. 1 - $6,665,000 pa
Stream No. 2 - $6,345,000 pa
Stream No. 3 - $7,716,691 pa
Stream No. 3 - $11,032,909 pa

Total gross revenue per annum will therefore be: $31,759,600

Rough profit and loss:

Cost of sales for 122 days, per p 13 HYR, was - $6,982,821
At $6,982,821 for 122 days assume daily COS - $57,236 pd
Assume therefore annual costs of sales will be - $20,891,224
Estimated operating profit per annum will be: - $10,868,376

It seems to me that that will be a reasonable slice of loot available to pick up the cost of anything that I have not taken into account [servicing Macquarie bank comes to mind]. I think that it is highly probable that after the bank there will be a bit left over to be squirreled away to pay for some exploration when that is justified. There is no point in consuming valuable cash resources on exploration at this point when there is no way to market for surplus product taking into account that we already have sufficient gas to meet the demands of likely customers in 2 years time when
there is a way to market.

People like us always think about the possible upside! I have a view about the upside which is this:

The sales of Mereenie crude for 122 days was for a price of $ 3,687,713 (see above). That was for 41,626 bbl (see page 10 HYR). That indicates that the gross sale price per barrel averaged at AUD$88-60. Between September and December 2015 the Australian dollar was valued at around US$0-69. So it looks as though the STO sales crew averaged US$61.13/bbl. That's quite extraordinary given that just before Christmas TAPAS had fallen to below US $40.

Never mind, I cannot explain that remarkable result. But turning to the upside all the predictions indicate that we can expect TAPAS to be steady on US$65 by Christmas. With the AUD$ at, say, US$0-73 that will be near enough AUD$90/bbl. Moreover US $79 is the prediction for the whole of 2017. Who can be sure what the net result will be for an Australian producer in terms of average US dollar receipts and a fluctuating exchange rate.

We can be reasonably confident however that there is likely to be a percentage acceleration of receipts from crude sales during the financial year 2016-17. Even if it is only 10% that will be another million dollars in the company's coffers.

In my view, it all looks good.

GLTA