One way of looking at it is
Given the value of AUT sale was $16 boe 2p and $22 per boe 1p which also had 20,000 boepd flowing then the true replacement cost is well below $22 per boe not the $35 quoted ...
The problem with the accounting standard used in the report is that they are depreciating past dated assett accumulation based on very different efficiency metrics once the production is actually happening... the money spent was raised from share holders and accounted for by diluting shareholder value at the time of purchase.. So it seems ridiculous to now later write that full cost off again against todays production...
However having said that, it is vital to depreciate some form of assett value against the current production..
I prefer to look at the replacemnt cost only...based on recent sales and then discount the 1P against any production revenue that was in that reserve sale. Others would argue you need to include the production..as we have production that needs depreciating..
At the end of the day i think whats important is that you have a ball park to indicate profitability and cash flow ..
From an accountants perspective Profitability - ie NPAT would be using $35.55
Future cashflow and sustaiable cashflow probably has a depreciation cost of around $13-17 in my opinion.
SEA Price at posting:
$1.21 Sentiment: Buy Disclosure: Held
