Apart from the Bluff news, how is this operational advisory being interpreted?
(a) Hedging:
From the 10Q the hedging in place for Q4'14 was:
Swaps of 5,098 Bbls @ $105/Bbl
Swaps of 13,616 Bbls @ $97.92/Bbl
Collar of 5,098 Bbls @ $90/Bbl floor
Hedgebook total is 23,812 BO
The Op Advisory notes "the following hedges in place" or maybe meant to be remaining in place?
Swaps of 4,588 Bbls @ $97.92/Bbl
Collar of 1,672 Bbls @ $90
So has SSN "monetized" swaps of 5,098 Bbl @ $105 + 9,028 Bbl @ $97.92 and collars of 3,426 @ $90 for total of $1,727,652 for 17,552 BO (avg of $98.43/Bbl)?
Still leaves 6,260 Bbls left hedged? Why not monetize them all?
(b) Total company production
SSN notes that Oct & Nov production as being 6,016 & 17,619 BO - totaling 23,635 BO. Why not use the remaining hedges and monetize the full 23,812 BO?
The question is what now is the expectation for Dec oil production out of NS with various wells SI. Obviously Q1'15 will see a big jump with 8 wells coming online but Q4 is the immediate qtr. As has been noted in the SSN Qtrly there is a lag of up to 2 months for the cash to be received. That may well be very helpful for SSN in stating Q4 financials. Also I would assume SSN receives cash on settlement of its hedges.
SSN presentation guided to "lifting costs" (which I interpret to be LOE + G&A) of $29/BOE but I suspect this number has been calculated on full field development. If I owned stock I would seek clarification on that. Just as importantly, since that preso was released in Nov you might want to get clarification as to what can be expected for total Dec Qtr production (1,261 boepd seems out of reach given Oct & Nov total avg is 446 Boepd and 65% oil).
(c) Debt/EBITDAX multiple
It all leads to the back to the Debt/EBITDAX multiple with EBITDAX for the Qtr needing to be $0.96875M (being the drawn debt of $15.5M divided by 3.5 as the multiple stipulated in the debt covenant divided by 4 to get quarterly EBITDAX rate).
No easy way to predict the financials but at least the target is known. Q3 needed to be $0.7857M to remain above 3.5 multiple - which the financials say SSN in compliance (but it's not stated for you - by my reading of 10Q it was about $1.2M).
Think my calcs are about right ...
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