For this quarter and going forward, BRK have changed the way they report their cash income and payments.
Previously they would report their income net of their WI interest after royalties. Now they are reporting the total revenue they receive as operators and then report payments to JV partners, production costs and royalty amounts.
So for example, say BRK have a 40% WI in a well which they operate, the royalty rate is 20%. The well produces sales on a 100% WI before royalties of $10 million and production costs are $500,000.
Previously BRK would report income of $4,000,000 ( their WI share of 40%) - $800,000 ( royalties) = $3,200,000 on the income statement and report their share of production costs production costs of $200,000 leaving a net income of $3,000,000.
Now BRK report $10,000,000 on the income statement, expenses of ( $2,000,000 royalties, payments to other WI holders 60% of $4,8000,000 of which $ 4,500,000 is paid to the partners plus $300,000 share of partners production costs = $6.8 million) leaving $3.2 million of which the BRK share of production costs was $200,000 giving a net income of $3,000,000.
The end result is the same but you have more transparency as you get to see TOTAL revenue generated by the well sales, and total royalty, payments to partners and production costs.
That is why in this report the payments from customers was much higher at $7,923,000 as this represents ALL the gross revenue BRK received on behalf of the Jewell JV, plus the Orion JV, plus the NET proceeds from the non operated STACK wells after royalties and production costs .
The production costs of $5,092,000 represent ALL the royalty payments for the Jewell well, net payments to JV partners and all the production costs . On top of that are the staff ( $152,000 ) and admin, corporate costs 9( $347,000) which equates to the $5,592,000 in operating outflows excluding interest and finance costs of $1,000.
@ChartsGuy, the $6,362,000 exploration and evaluation you refer to is expenditure on drilling and completion of Rangers, plus the Flames pad construction, rig mobilisation , initial Flames drilling costs and leasehold acquisitions, which primarily are leases in the existing DSU's , mostly Rangers and Flames .
They are not as you say " spending all the oil profits speculating on more new landholdings" but hopefully pretty soon they will start increasing their spend on leasing new acreage to establish more DSU's .... and they have given a strong clue that may be the case.
View attachment 4311256This will be a critical component of replicating the Jewell, Rangers and Flames experience to propel BRK to the next level. A $6,000,000 spend should get them 4000-6000 net acres. BRK haven't picked up any new acreage positions outside their current SWISH holdings for a while as they have been concentrating bedding down their current DSU's... I am checking that like a hawk.
Additionally, speculative acreage purchases is part of their land and leasing model where they do buy acreage which they use to trade and swap for acreage they want/ need for their DSU's held by other parties but they haven't done any of that activity for a while now.
They have included $7,005,000 as payments from borrowings which represents cash from the Flames Con Notes raising which is why cash is so high at $17.672 million ( which includes a $1.187 million currency movement benefit). These borrowings will be repaid in July by the exercise of the options which still has ~$16.3 million to bring in.
So today's quarterly bears no real surprises apart from the new way of reporting cash inflow/ outflows. The cash build from production of $2.63 million will be significantly higher for the June quarter with more than 2 months of Rangers production ( but only just over 1 months cash payments) and the October quarterly net cashflow will blow everyone out of the park.... the market may even take notice by then.
All in all another foundation building quarterly and looking forward to news regarding if/ how close to Sundance Kid the Rangers well is performing.
Another great day to be a Brookie!
cheers
Dan
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