Pretty ugly day. Capitulation perhaps? Looking at the latest T20...

Pretty ugly day. Capitulation perhaps?

Looking at the latest T20 (for August), there has been some compositional changes but broadly the top 20 still accounts for around 50% of SOI. Fred Bart of EOS/AKP fame/infamy has gone from 4.2m shares to 12.2m since March while Warrel Superfund dropped right out. It will be interesting to see what the September report looks like. There have been some big dumps so clearly someone is wanting out.




As for FCF for 2H22, even if I take spot prices of US$78 for the whole half, the company is still FCF positive so it's a bit disingenuous to say otherwise by some given the average price for the September quarter is/was a lot higher. Would love to see some numbers if some would like to share.

From my perspective here's a very simple view of the rest of 2022 and 2023 on fairly conservative assumptions.

• Given the company has oil, gas etc and there are multiple currencies involved I've kept it really simple and reduced the AUD equivalent BOE price by 22% from CE1's forecast, which is approximately the difference I'm getting between the forecast oil and gas price vs spot prices and currencies now.
• I've kept opex, G&A and interest the same while royalties adjust lower with the lower price. I've also trimmed the hedge losses which will also reduce. There's not much science to the reduction but I've kept it conservative. It would be hard to say a 22% fall in the equivalent oil price is equivalent to a <10% reduction in hedge losses but this is just a simple illustration
• But MOST importantly, I've taken the spot oil price for the WHOLE HALF even though the average price for the September quarter is a lot higher. So this scenario shows either a very conservative view or takes into account further declines in the oil price - choose your poison.
• Finally, at 4300 boe/d, WTI$78 and capex of $45m my total cashflow breakeven estimate for 2023 is ~A$58 BOE.

As for 2023, using my cost assumptions above and taking that same spot price for the whole of 2023 on 4300boe/d I'm still getting +$16m in FCF using $45m in capex - that's a fairly conservative lens given there's basically zero volume growth so it's almost all maintenance capex. Hopefully that assumption covers anyone's view on super aggressive depletions

Even using those numbers, that's a 23% free cashflow yield and more than enough to fund some growth, a buyback and a $5m p.a dividend. Sure it's lower than what CE1 have stated, but the pricing assumption I'm using is also materially lower. That's still a pretty good outcome and obviously with a higher oil price the outcome would look even more attractive.

Oh yeah, and there's Montney, which I estimate would be worth more than double the present SP.