Be careful
@MikeyMo ... SSN is nowhere near positive cash flow based on this Qtrly and that trips up most of us.
Also there is an implied error of sorts in the LOE. I noted it was $AUD which of course it is not. But I did want to "reserve" 25% of LOE costs because I believe workover expenses do get put there (as E&P accounting says it should). Same end result for me
The operating netback number excludes interest charges. It also excludes Capex spend which falls into either "Maintenance" spend or "Growth" spend. This is an E&P company. It operates a depleting asset over time. To maintain a certain amount of production is has to spend capital developing its proven reserves to production (i.e converting 1P PUD to 1P PDP) - the all important Maintenance spend - and to spend some capital by exploring to find new Reserves (and hopefully more) to replace that which has been produced.
As noted in the value thread -
"The 2017 CY production average is difficult to estimate given:
a) changes to SSN past historical production profile given sale of NS
b) unknown production decline curve of the workovers
c) unknown rate at which workovers have been TIL'ed and overall capex spent
d) Most importantly - how much capital needs to be invested to keep production at that rate (my favorite topic of capital efficiency)."
What have we learned from this Qtrly?
(a-1) new "historical" production profile appears to be ~765 bopd for FB. What can be inferred from this?
(b-1) I'm waiting for the 10Q but possibly by looking at prior 10Qs of SSN up to this we could estimate what FB was when taken off OAS, estimate decline at say 5% (so not typical shale).
(c-1) be almost impossible to figure out but you could estimate by following that SSN states increased FB from Sep-Dec by ~ 6,000 BO. So the Sep ~60,000 would have declined to 57,000 if no maintenance (again this is not keeping stuff working it is capital spent to keep production constant) capex done. Thus overall "increase" is ~9,000 BO to get to 66,000 BO.
(d-1) Now its really tricky because SSN has spent ~US$540K on "development". To this I'll add to 25% I took off the top from LOE to come up with a total of about $1.2M. The incremental production was 9,000 BO in 90 days so call it 100 bopd. Divide that into $1.2M and you get $12,000 bopd. This is NOT a good number.
Alternatively we could say just count the $540K and divide that by 100 bopd and now its $5,400 which is a very good number (if you choose this then you're going to have to add back about $10/BO to the LOE which will make the operating netback negative - sorry no free lunches)
Hope everyone is following.
I wrote a post just over a year ago
SSN Transformed - which covers capital efficiency and how I was looking forward to SSN to improving its metrics. The number for capital efficiency was $5,000 based on the aggressive workover plan.
So back to the value thread and the Median case suggested that at 800 bopd with $55 (WTI) and an operating Netback of $27.39 that the EBIT of ~$8M is ~$6.2M available to shareholders from which we could subtract a further 4x$1.2M (maintenance Capex) which leaves $1.4M as discretionary cash flow. I remain surprised at how stubbornly high LOE remains.
@strauss - would Rainbow be the only asset they could sell (maybe to Kraken). At 97 bopd they might get $3M for it. Nothing else has any book value (or any value really) beside Foreman Butte and a sell down of ownership there causes immediate BB reduction (and production which affects in a negative way their costs).
GFTA
