BYE Chart, page-62

Reading the posts on HC I see a lot of expectations re Byron share price. I have them too but..... (I can hear the boos already).

Talk of a share price well over 50c needs to take account that equity dilution has been severe. When the CEO forecast in October last year that he would be "personally disappointed if the share price was not well over one dollar within eighteen months" Byron had 705 million shares on issue. It now has 1040 million. So the dollar call is now a 68c call. Yesterday's closing price of 21c is equal to a price back in October 2019 of around 31c.

As an aside, Byron shareholders really needed to get into the SPP at 13 cents. Those who didn't transferred significant wealth to those who did.

'Merely satisfactory' flows from G1 and G2 may not lead to any significant rise in Byron's net cash balance for some time as money will be needed for further drilling. Say G1 and G2 both flow oil of 1000 bopd, my estimation is that, with some small dilution from SM71, Byron would produce from mid October all up around 3200 barrels per day. At a Louisiana Light price of US$45 that is revenue of around US$51 million (allowing for say 10 days shut in of the platform for maintenance, cyclones etc ie $45*3200*355). Sounds good, but now deduct royalties (around US$9 million @18.33%, production and transport costs maybe $US15 million (hard to be exact) and other costs (staff, admin, loan repayments etc) and we may be left with comfortably less than US$30 million cash over the year (Oct 2020 to Oct 2021) which may allow for, say, 3 new wells to be drilled during that period without the need to raise additional finance. On this basis it may take up to two years to find enough revenue to drill the G3 to G9 wells being considered in SM58 unless Byron goes to the market again.

Of course, the above analysis does not consider many things, for example, it does not take account of revenue from gas (maybe gas revenue is broadly equal to another $5m per annum - again tough to estimate) and the fact that if Byron finds more oil it gets a new source of cash. Also, that Byron may get to 8,000 barrels in SM58 (platform capacity) well before they need to drill all nine wells.

It also does not take account that oil prices may rise, that oil from G1 and G2 is expected to be higher than 2000 bopd (as suggested by Byron management in their recent 3 year cash flow forecast ie more like 2500 bopd - from my reading).

But what if G2 is a dud (remember SM71 F4 and F5 were both disappointing), world oil prices crash again, a platform accident or disaster occurs.

Hopefully all works out well. I am confident it will.

If so, a key factor will be how much the market looks through Byron's continuing need to spend for later gain. While the market does this with many growth companies my feeling is it may be less accommodating with Byron which is a company continuing to be subject to significant ongoing risks, such as world oil prices, drilling success, structural decline in world oil markets etc.

So, it may take more time than many think for the Byron share price to appreciate to levels above 50c. Love to be wrong.