ok I need to revise the figures given the production rates are...

ok I need to revise the figures given the production rates are only 40% AED:

production levels using 270,000 barrels for previous quarter at current low price of circa $40USD x 1/0.7 to convert to USD = $56.8 x 270,000 = $15.336 x 40% = $6.13M + interest revenue of $3.652 (amount in DEC 08 figures) = circa $9M.

This equates to a negative operating cash flow of circa $10m per quarter.

Which makes me think why are the operating expenses so high in comparison to the production rates?

Looking at the Managing Directors presentation at the 2008 AGM it states that the majority of operating expenses of FPSO are fixed.

This goes some way to explaining the high operating expenses and still provides a upside position from extra production.

As some have noted the recent quarterly production rates are very low, however if additional production can be brought on line this will go straight onto the bottom line (AGM presentation mentions the workover of Puffin 7 to help achieve this).

Also what about bringing online the Puffin 11 well. It was tested at flow rates of 3,600 bopd and management have stated potential of 10,000 bopd (although they have been optimistic in the past). What would the effect of even a low rate of say 5,000 bopd be on cash flow? We need to know what the operating expense impact would be? Can any one shed further light on this?

Management are going to be aware of the current negative operating cash flow and as I see it they are currently utilising the storage capacity of the FPSO which holds up to 740,000 barrels. They are also looking to increase production to provide econmies of scale to production costs which have a large fixed component.

If we look at a so called armageddon scenario they have the option of halting production and reducing operating costs - however I don't know the contractural arrangements and the impacts on expenses - again if anyone knows more that would be good.

Unless management thought that they can improve production and profitability they would just sell the remaining 40% share and distribute the current cash held.

I would be interested to obtain others thoughts on this and particularly the impacts on operating costs and revenue from increased production from Puffin 11.