If we review the facts, you will see that some of your estimates are wildly incorrect.
Firstly some background.
Manora went to FID with a gross capex estimate of USD246 million, which was increased to USD278 million in late 2013 and again to USD298 million in early 2014. Tap’s share of this expenditure (including the carry) was initially USD87 million, which has now been raised to USD97 million. A slight discrepancy exists in this latter number , which may be related to the capped carry.
In the year ended Dec-12, Tap spent A$13 million on development expenditure which was capitalised. This level of capex was also reported in the Sept-12 and Dec-12 quarterly reports as Manora expenditures. In the year ended Dec-13, Tap spent A$44.3 million on development expenditure which was also capitalised. This number (with a $0.3m variation) was also reported in the 4 quarterly reports from March to December 2013.
So, with a total capex of US$295 million (AD328m @90 cents) as at now, and net total expenditure of US$97m (AD108 m @ 90 cents), Tap has AD50 million remaining to spend (as at Dec 2013) (i.e. AD108m less 2012 and 2013 spend of A$13m and A$44.3m). I should add that some of this expenditure was made when AD was at higher rates, which may show these calculations as conservative.
The annual accounts updated the cash levels for end February (A$24.5 m)and debt drawdown (AD20 m), without mentioning the capex spend on Manora which looks to be poor reporting from my angle. These numbers will be available to us at end April, which will assist in this process.
So, as you can see, A$50m spend can easily be funded from A$43 million cash plus A$76 million in debt (A$20m plus USD50m @ 90 cents) using December 2013 numbers from the balance sheet.
I have also avoided looking at 2014 cashflows as I don’t see that they will be needed in the analysis. I also note that no drilling is planned till 3Q 2014, which is timed for activity post the Manora startup, probably with the same drill rig, so this expenditure will come from cashflow which will be tax effective.
As an aside, and after reading the reports over the weekend, I am happy to see Ghana go, as this is better in the hands of the big boys. However, I was disappointed to see the Taunton well expensed, as I understood that these results were OK.
Hopefully, this replaces some facts with the recent fiction.
Cheers, Al
TAP Price at posting:
43.5¢ Sentiment: Buy Disclosure: Held
