As I said, dividends are for those that have "sustainable" production cashflow and therefore the business model is based on monetisation through production which means continuous development drilling. the BRK model is not one based mainly on drilling for production.
BRK will make significant free cash from producing wells, but the majority of their drilling intent will be HBP drilling on new DSU's to prove those reserves and revalue the acreage... apart from the Bradbury vertical wells which they will drill for production but will only get 1-2 wells on each 40 acre DSU at most. if they can get another 10 40 acre DSU's in the Murray, then that will be a significant project in it's own right , but we are a far way from that.
It is not that they won't have the cash to pay out, you can see that at this time, they are producing free cash from production , but over the longer timeframe the cashflow will be variable and lumpy. There will be periods when they won't be drilling and spending their cash on purchasing leases to create new DSU's. During those periods their production cashflow will fall as the wells decline. Most of the monetisation proceeds will arise from selling the PUD reserves to those producers that can drill them much faster and more efficiently than BRK at one well every 3-4 months. Those monetisation " events" will be substantial, but periodic, maybe one event every 2 years or so ( my guess only ).
Why would the share price increase after an asset sale.. so for example, if the BRK market cap is $60 million, and they sell , all the Woodford PUD's , which represent ~40% of their total reserves for US$70 million or ~AUD $110 million ( just for example), would one think that event should move the share price to reflect that cash, and a rerate based on the 60% of the reserves left in the company?
The other reason why BRK won't pay dividends is because they won't be franked. Any cash payout will almost certainly be in the form of capital returns which are subject to CGT rather than income tax.
BRK will not be cash light, those days are gone. It will still have to be prudent in it's cash management but the company has made it pretty clear it will not be paying dividends, not that it won't be able to, but because that is the least efficient way for them to return cash to shareholders, if they choose to return cash.
Hope that makes sense.
cheers
Dan
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