Imminent Free Cash Flow +ve

Below is a post showing the current rate of cash flow production by SEA.

"Fourth quarter development and production related expenditures totaled US $73.4 million and for the full year were US $176.1 million, at the low end of the Company’s previously released full year capital guidance. " This indicates:

• Firstly SEA capex spend for 2018 was at the low end of guidance (as per image below from June 2018) - this actually related to 23 wells online + 2 SPUD (dimmit) + 4 wells drilling (Roy Esse). This averages to ~$6M, which is in line with capex rate per well guidance provided by SEA.
• The other interesting thing to note is that all this capex occurred from Q2 2018, but the first IP date of the well was 2 June 2018
• SEA achieved EBITDAX of $100M in 2018, and by my forecast Q1 2019 is expected to be $30M (due to the curtailment of oil / gas volumes, and the lower price experienced in Q1)
• Regardless, from 9 months of the first well (2 June 2018), SEA have recouped $130M of the $176M spend! I think this strongly attests to the productivity of the wells, and how close SEA is to becoming FCF positive.

SEA now has hedges at $61.27 locked in for the rest of 2019.
In 2018, the average realised price of oil was $62.11, which is slightly above the hedging locked in for 2019. SEA sold 9,612 boe/day = 3.5mmboe)
Given the LOE efficiencies expected in 2019, SEA should be able to achieve an equivalent rate of EBITDAX / boe of $100M / 3.5 = $28.50.

So to recover the final $46M, SEA only need another 1.6mmboe. I think this attests to the rate of cash flow production (given that the $176M capex includes some wells that have only just come onto production)



Further corroboration of this payback is provided in the chart below.
Assuming a rate of $6.0M per well and EBITDA / boe of $28.50 – SEA require roughly
210 mboe to return the capital outlay.
Given Live Oak has 308mbo/412mboe ~ 156 mbo to payback capital.
The type curve below shows that this occurs around the 12 month mark (and SEA have shown that the wells are performing ahead of the type curve).

I think this proves that with WTI around $60, SEA is able to achieve a payback period of 12 months, with production after that point available for shareholders (and debt).