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SSN samson oil & gas limited

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2015 - per the 10K, page-5

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cmonaussie

11,255 Posts.

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18/09/15

15:27

Post #: 16018614
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Originally posted by Rob79 ↑

Cmon, some good discussions occurring which is encouraging, some initial comments on the above post as it more general and I think your points hit the key challenges.

Debt/EBITDAX - definitely a focus, all my prior posts were based on my estimate the rate would be 3.49 so personally I was pleased with the number achieved & reported, fair to say the $300k repayment could have been done to protect the ratio and ensure the covenants met. For future this could indicate that if the ratio is at risk on base numbers then additional repayments could be made to reduce the debt or hedging realised to protect the earnings.

Cash cost per BOE - I agree that using the historical number that the $55 wti would be a good guide. I would add that an alternative approach would be using the last 6 mths costs as a guide as that is likely more indicative of future costs. My rough calcs on this is 6 mths costs (calculated from the 10k and Dec 10Q) were: LOE $13.36, Taxes $4.82. Because the G&A is limited by covenant we can use that fixed number divided by an estimated 2016 volume forecast to estimate 2016 guide, same with interest.

For interest I think the future depn charge can be estimated using the June 10k carrying value of production assets$29.7m & dividing by proved reserves 1,483 MBOE or $20.05. Ignoring G&A as the existing wells are covering these that gives $38.22 plus the bakken discount gives an optimistic minimal cost required imo. These costs look consistent with the ND Gov report and reflect some of the cost savings and also volume effect on cost recoveries.

Capex budget looks small and atm probably coved by existing liquidity mentioned in the quarterly. For me there appears no need to drill to maintain 2015 production in 2016 year therefore any drilling will increase risk. If the capex planned was higher this would be a red flag to me. Planning future new projects for 2017 FY or for if OP recoveries is a better focus for effort as these costs can be capitalised and the impairments this year have cleared some room in the balance sheet for the future imo.

Reserves give a clue as to value and support NTA calcs. This may be important if sentiment improves and imo supports higher valuation than current market cap.

Overall, I think SSN compares well and has done better than most ASX listed O&G coys, that said the sector has taken a beating and I expect that to continue as more Annual reports come out but that is purely opinion on my behalf as are the above. In that respect I think it wise to consider all views and think your comments objectively consider key issues for O&G coys.
Cheers

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Hi Rob,

Always enjoy a reasoned discussion. Interesting thought of yours on the prepayment to keep the ratio whole. Its definitely the number to watch (for this Qtr and next) due to the sensitivity to oil price. Something you might like to do is create a sensitivity of EBITDAX to WTI (remembering to take off the differential). My concern as highlighted is if 3.47 is the multiple for those annualized inputs then its going to be close again.

Why are you ignoring G&A (or have I misinterpreted?) for cash cost? Lifting cost is LOE+Taxes. Cash costs accepted as Lifting +G&A+Interest (and preferred dividends if any). I only pointed out the full cost (adding in DD&A) just for Net Operating Income purposes. Just about all shalers are failing on this at present. I agree on your DD&A estimate BTW.

2016 will be interesting as the presentation doesn't quite gel with the 10K and while the good news is that SSN is living within cash generated from Ops. The negative IMO and this differs from yours, is that production and reserves are declining and not much on the horizon to arrest that. For an E&P company that's not where you want to be - even in low oil price. I can only point to some of the big guys like say CLR and their strategy is not to grow at present price (which I agree with and EOG has be saying this for a couple of Qtrs now) but to align their Capex to their cash flow and try and maintain current production. Walking a tightrope.
SSN Price at posting: 0.4¢ Sentiment: None Disclosure: Not Held
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