The following table shows the likely pricing we receive based on different WTI prices, after taking into account hedges (both floor and caps) for 2019.
Operating costs are based on guidance for Q2, resulting in resultant EBITDA/boe.
- Basically at WTI $59, a $1.00 movement to $60WTI, only increases our average pricing by $0.29
- Similarly, if WTI were to fall to $50, we would only lose $2.0/boe of EBITDA
- Interestingly, even if WTI were to fall to $40, our average pricing would be $45.64, EBITDA/boe of $27.69
Essentially SEA is just about immune to downward price of oil this year, given the attractive floor pricing that locks in 85% of our expected production.
Hence my view, oil price is not driving SEA cash flows in 2019 - it is production rates, oil%, and controlling capex.
Yes, certainly the long term valuation is impacted by oil, but given SEA largest capex is to get that car up the hill, and we will have it there by end of this year, I don't think short term movement in oil is significantly impacting us.
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