The company makes a net profit at current oil prices but no...

The company makes a net profit at current oil prices but no where near the latest guidance issued.

The guidance was an additional $32.7m operating cash flow for the last half of the calendar year assuming $95WTI and about $20 WCS if I remember correctly. The guidance includes A$18m for capex, and we know they need about A$25-35m annually needed to maintain production. So I am not expecting much growth from this sort of spend level.

The company's operating margin pre capex is expected to be around 45% at the assumed oil price. So if you adjust for current oil price (around 12-15% lower than guidance), you should expect a 25-30% hit to operating margin.

(I don't think hedging has as much an impact here as in the past - it's winding down, and oil prices not too far off hedged prices either)

So that sort of reduction would suggest an run-rate half year operating profit as low as $23m on my numbers, or $46m annualised. This would cover $30m in maintenance capex, but leave a paltry $16m for growth, dividends and building the balance sheet. A far cry from their recent decree of splitting cash flow evenly between capex/SH returns/balance sheet.

I reserve my opinion on whether it's a buy or a sell at these levels, but I do think the market is finally waking up to the reality around some of the numbers, especially pressured by such a huge capex bill required to maintain production on these particular assets. I just wish I knew prior to investing before as I paid the premium for not knowing.