CE1 (ASX) Ann: Company Update

Originally posted by James7821: ↑

I explain and am happy to explain all arguments I raise, backed by citing reports and numbers, but I wonder if you will back up your statements like "they are not interested in growing production" and "cash flow accumulation is the driver"

Let's look at the last 6 months as a case example (this is the longest period I can use which has somewhat comparable oil prices and production costs):

CE1 went from 4,162 boepd 6 months ago (Sept qtr average per their 4C) to a current guidance rate of 4,000 to 4,300 stated two days ago (basically unchanged if you take the midpoint), yet over the same period CE1 went from having circa $5.7m of NET CASH to now $4.8m of NET DEBT. That's a $10m reversal. Woeful. And in that time, the company had the miraculous idea (Freemans?) of paying a $2.5m dividend to shareholders per the Dec quarterly. Why a dividend? I wouldn't be surprised if that dividend and then some will get raised back in a dilutionary raise in the not too distant future.

*PS you can't use the #8 and #9 well capex as an excuse like someone else tried - it's incorporated in the FORWARD guidance of 4,000-4,300 in the update just recently. Remember, the Q2 forecast average production with these wells full steaming ahead is just 4,200.

So, when oil prices were higher, they didn't grow production and didn't grow cash. What do you think will be happening with a LOWER oil price?

You are presenting an "either or" argument, insinuating they have a choice between growth and cash flow. But they don't. The companies in the list above do (the ones who only needed to spend about 50% of their OCF to grow at market rates could boost more capex if needed). The truth of the matter is CE1 doesn't have a choice. And that's based on the assets they've drilled so far.. probably their best ones assuming they are shopping for a sale..

What they have in the ground is not highly valuable if it costs more to drill and produce than what its worth in terms of gross value. This is why that argument fails. The market looks through quantity and right at the margin. Run a reserves analysis on the peer group and compare production margins and you will find similar correlations. I haven't got the energy to do it at the moment, but it would be a great exercise for those more invested in CE1.

Again, just my opinions, please conduct your own research.

Expand

You are presenting an "either or" argument, insinuating they have a choice between growth and cash flow. But they don't.
But yes they do James.
Outside of their obligations to the employees and creditors Blackspur has an obligation to repay the C$30m debt to Calima and ulimately to meet their ARO obligations to the province of Alberta. Incidentally, their very low ARO obligation is viewed as an asset by another Canadian E&P .
Calima's intentions were evident in April when they released their March quarterly which revealed Earnings for Q2 of A$9.6m with Capex of A$3m [ down from A$11.1m in Q4 of 2022.
Growth in capex at Blackspur has now been replaced by 'optimize the reserve base, revenue and operating profits' [ refer to Monday's update]. I allow A$20m in Blackspur profits in 2H23 to supplement the forecast by Calima of A$7.5m in free cash flow for Q2.
The Calima chair says the data room is open and is operating efficiently. As interested parties- Canadian E&Ps in particular-attend that data room thru 2023 they will be focussed on Blackspur's assets - its Cash at bank, the weekly growth in cash at bank, the inventory of oil tanks and pipelines and infrastructure and the 90 producing wells (valued and audited in december 2022 at A$139m) and will conduct their own assessment of how quickly the producing inventory can repay their intended outlay for Blackspur's net assets.
They will give scant attention to a Capital Intensity chart.
here's your chance to withdraw this statement:
If the offer was revised down from "materially higher than current market cap" to even half of CE1's market cap I am sure they would've taken the offer.