Maybe just to finish this offJJ hated my response at the AGM in...

Maybe just to finish this off

JJ hated my response at the AGM in 2019 ... I actually waved this graph it front of him (without 2020) ... now updated it with 2020 AR info ... one could make the case that at least the turnaround has begun!! (see I can say something positive about OEL).



The supporting data table is



Why is this important?

1. Affords another opportunity to say "I told you so" to JJ ... and as the song goes "...don't you ever let a chance go by oh no don't you ever let a chance go by..."

2. Matches up with MU's ROACE % numbers on page 11 of the Annual Report

ROCE = ROACE as I am using the period average. So we are looking at the AVERAGE return on capital employed by the company during the PERIOD 1 Jul 2019 thru 30 Jun 2020. We are looking at balance sheet numbers (which are at a point in time i.e. 30 June 2019 and 2020 and simply take the average of the 2 numbers)

As you can see, OEL has a lot of work to do to get this business to start earning a 15-20% return on the capital employed (don't forget our cost of capital is up around 14-16% (IMO)). It can be done of course and the 2015 numbers are a reminder of that ... before Galoc was sold and a capital return was done. Simply telling us that the income from SM-71 was reinvested into projects that either did not earn a return (e.g. those dry holes) or a yet to earn a return (e.g. GC-21) and what was left over wasn't enough to feed the beast.

I like MU because he gets it that shareholders need a return too ... that would be ROE ... the debt holders are paid before us (because they take less risk) but there is nothing left over for equity holders that means the project should not have been taken on ... I always end up at the required rate of return above the cost of capital discussion.

Now to be fair I should also show a "peer"(?) comparison ... using OEL, BYE and COE (only because I own it and I wont talk about it lest it be considered cross promotion).



Quite clearly BYE "owned" OEL by this measure ... until now ... and we should know the reasons. OEL makes a comeback and should show a superior ROACE when compared to BYE in FY2021. For the record COE is a disappointment due to problems getting a gas plant online. Massive project yet to pay its way. Prior to this FY, BYE was around the ROACE number that MU want OEL to be at (and stay at).


Time now as it were to look forward once more. The one thing we don't get is any form of forward guidance ... so we do kind of have to do that ourselves. In that regard, I am sticking with my earlier models wrt to Residual Earnings and Intrinsic Value.

Outside of that model we have the EBITDAX model which I think @akap favors ... but I think we have 3 things (IMO) that we should be adjusting for.
(a) FY2020 has an anomaly of shut-in production. It also had higher than avg Hurricane activity - but that is an "expected variable". Probably should add something for that
(b) we have to make some capital investment to maintain production flat ... that isn't broken out (nor is the corporate decline rate). Probably should subtract something for that.
(c) Gain(Loss) on derivatives ... that was almost $6M gain this past year (and I'm happy we have that but in a perfect world it would be $0 and we wear just the cost of the setting up the derivatives). I'll just remove that.



In Aussie's world, I would be looking at "Adjusted EBITDAX" of something like
$21M - $6M (Derivatives) + $1M (Abnormal Production loss) - $3M (Capex to keep production flat). Those adjustments are WAGs.
Makes Adjusted EBITDAX ~ US$13M

Now looking forward from that basis to an estimated (adjusted) FTM of ~US$17M
Using a 5x multiple puts EV= US$85M ... and say Net Cash of $5M says EV= US$80M or ~AUD$120M which is $0.027 per share.

So another of those peer multiple type valuations landing in the 3cps +/- 10%

It does seem that on any fundamental basis metric, OEL share price should be a winner this fiscal - but then again we are making
1. Positive assumptions on GC-21 (for good reason given the talk to date)
2. Mgmt change will begin to address the mgmt discount prescribed to the stock
3. Molton stays positive

Good fortune to us, I guess.