This was my post from 23/3/21 on, fair few large misses here...
Known changes QoQ;
- Infill drilling Beibu completed 9/2/21, producing at 10,000bopd gross (HZN share 26.5%).... This is up from 9,080bopd gross, so expect a 5% increase in Beibu production, only 5% because infilling completed in Feb Only 1% increase
- Maari workovers completed and results seen last quarter, expecting 6,000bopd gross (HZN share 26%)... If forecast hit, production will increase 15% from 5,185bopd gross to 6,000bopd gross 1% increase, but more to come
- Combined we could see 371k bbls for this quarter, up 8% overall 1% increase
- Revenue previous quarter was USD$18.9M on 437k bbl sales = USD$43/bbl
- Current POO is USD$64/bbl $62.94 realised price, a substancial loss of $2.5m on the hedging - however I like the hedging as it provides safety on downside.
- Exchange rate worse, 73c last quarter, 77c this quarter leading to 5% FX reduction
Guestimate changes QoQ;
- USD$57/bb; average price for the current quarter, maybe higher??? $62.94 realised price, significantly higher than my forecast, but weighed down by loss on hedging, if you remove hedging the realised price was $55.bbl, next quarter based on oil price stabalising will not have such a significant negative hedging impact.
- Total revenue = USD$21.1M or AUD$27.4M - 371k bbl x USD$57/bbl, which is 12% higher quarter on quarter** Big miss due to production forecast being way too high, actual of $19.9M prior to hedging, or $17.4M post hedging
- Production expenditure = USD$6.3M (assume no change) Came in at only $4.5M
- Operating CF = USD$14.8M or AUD$19.2M Big miss $12.9M largely due to the negative from hedging which will normalise
- Amortisation = USD$6.2M (slight increase due to infill drilling) About right $6.17M
- Total Capex = USD$1.5M (reduced significantly since Beibu infill drilling cost USD$5M HZN share and all included in last quarter) $4.4M because of block 22/12 which someone rightly corrected me on in March.
- Estimated FCF = USD$7.5M or AUD$9.2M Big miss, hedging
- This would put HZN at about a 2.9x FCF ratio IF oil prices were to remain above USD$60/bbl. Or 1x Revenue ratio, or 1.44x operating cashflow ratio... HZN with cash in the bank looks significantly undervalued at the moment No change to this sentiment, as the hedging will normalise this coming quarterly as oil prices have normalised above USD$60/bbl.
** Important to note that sales from Mari were 236k bbl on production of 122k bbl, inventory was basically zero at the end of the last quarter so this will normalise. The company held stock so they had revenue during the Maari workover.
HZN looking strong, unfortunately the increase in production was not really seen at all, a big miss since the company definitely forecasted higher production. The other unfortunate negative was the loss of $2.5M on oil sale hedging, though I am comfortable with this as it provides downside protection. Of note is that we had a significant oil appreciation during the quarter which was negative for the companies hedge - this will not exist next quarter so it is realistic to expect FCF to increase by US$2.5M with maintained production.
My position is unchanged, company has annualised FCF to the tune of $16-$25M USD or AUD$21M-$32M, have an overall cash position and I expect a distribution to be announced within the FY results. Hoping for a run up to ~13c mark, as always time will tell.
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