They've hedged their oil 3-ways. 6.18 mmbbls for 2020. Long put price (bottom line) is USD 54/bbl to the Brent price. When Brent drops below that price, as is the case at USD26, STO gets 54/bbl.
Post hedging FCF brk-evn is USD24 & without hedging its USD 29/bbl.
USD10/bbl increase in Brent gets them apprx USD300-350mil FCF. All their assets r FCF positive at USD <40/bbl includes their CSG project.
10 days of utter mayhem has affected the SP of all Oilers globally & brought the sector to its knees.
All major producers & juniors are hurting with the massive plunge from USD61 in Jan to 31USD on the 9th March (post-OPEC talk failure) & 26USD now. 5yr Fwd oil curve were 65/bbl so the drop comes as a shock so expect the next 2yr fwd POO curve to b revised to the 30-40-50 scenario.
5yrs ago Debt was the red-herring for STO, as they borrowed/raised capital/sold equity etc to build GLNG & then PNGLNG. So, whilst debt may not b an issue for now, drop in Oil price is causing a lot of grief to their SP primarily due to the push'n-shove betwn Saudi & Russia & Covid-19.
Next qtr onwards STO will b down to just 1 FPSO in WA at Pyrenees which coincidentally fetched USD30 premium to the Brent recently. Wonder how that will do now.
STO's owned FPSO Ningaloo Vision at Coniston will b offline till late 2021, with some infill drilling planned. So expect cut-backs to 2020 Capex to navigate thro' these times. They did this to their staff/contractors back in '98 when Oil got into single digits & Cooper Basin ground to a halt with just 1 rig (ODE-32). Revenue then was AUD770m compared to the USD4033mil last year so a slightly different ball game. So during tough times, betcha some bright spark in-house will still come out on top at the end of the year with 'met/ exceeded their KPI"s'.
Watch this from the sidelines as Exxon, Chevron, Conoco, BP etc do the same with Capex cuts et.
Locally WPL, STO, OSH, BPT, ie the 'Big-4' Oilers will see the impact on their SP & will affect non-producers.
Wonder if the upcoming AGM on the 3rd of April at the Adelaide Oval will happen via video link.
Tough times don't last, Tough People do.
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