production from current assets - Lightning very mature and stable decline, SM71 wildcard can they get any oil out of recompleting F5 how will F1 perform longer term etc - do the JV have the funds or inclination to do so, GC21 appears to be relatively stable, MBW & OBS are adding but a little.
O&G pricing - with the majority of reserves now in Gas and with falling oil production the catalyst for a rerate is a longer term increase in gas price - i expect this is more likely to happen than oil spiking higher in the near term.
OPEX/CAPEX: have no view on this but it looks as though Phil is finally right sizing the organisation i do not know why it took 2 interim CEO's and three years to come to this conclusion. From my numbers production COGS is around 30% of revenue with 22% of this Production Costs / 8% Staff & Admin - not sure how much further than can cut costs but if they are running down the assets and non-operator do we need any fulltime staff in reality ? CAPEX is a more interesting one clearly plenty of reserves left which in theory should be low risk (But so was F5) to recomplete in other sands ect. No reason why the company cannot put 20% of FCF aside to pay for said operations which should free up significant FCF to pay dividends which the company really needs to explicitly state is the plan going forward and paid regular (read quarterly).
Considering all of the above i think its quite reasonable the company will have 0.5c cash post the return and should be adding 0.1c per quarter so on this basis the company could conceivably have 0.8c cash by the end of the year - i hope they do not and have instead distributed a good portion of this by this time. I can see them wanting to hold a cash buffer of say AUD$15M which would be 0.3c no reason for them to horde cash unless they have a specific plan to do say further drilling at lighting etc (this field has really been the quiet performer for the co and expect its best days could be ahead of it if the gas and NGL price rises longer term).
Lets hope post the CR and some hopefully explicit comments from management around longer term payment of dividends the market takes note and rerates OEL going forward.
OEL Price at posting:
1.2¢ Sentiment: Buy Disclosure: Held
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