how do i c sea in 2018 - the quick and dirty Strength Good...

how do i c sea in 2018 - the quick and dirty

Strength
Good assets which are producing above type curve

Weakness
Weak balance sheet- why weak?. (short version) its not they have high debt the main issue to date has been inability to be cashflow positive leading to continual liquidity issues. Current ratio needs to be >1 thus if assume Vitol by Q1 amortised & other liabs still around 35m then even if sell dimmit then still on a sticky wicket given debt is rbl and sale of dimmit would decrease base - obviously. Which may require debt repayment. Reval of non current assets may assist here but company still burning cash and as noted still need current ratio >1.

Ok maybe able to keep afloat but need to reinvest back into buying acreage - cant do that w/out money

opportunity
Oil price continues to rise and settles over $60 on average leading to net revenue of around 150m. Tighter on development expense but need to generate the sales which requires new wells in prodn cycle but should be positive cashflow at that level and keep bankers satisfied short term

hedge management - as some of the old hedges rolloff maybe have opportunity to lock in more with better prices shoring up risk management ie higher prices lockd in

issue paper - likely junk so would be expensive for company and likely increase WACC - but if used mainly for development and acreage rather then debt repayment then maybe positive from SP perspective - can be positive or negative depending on timing / reasons and how markt perceive

threat
oil declines
base for lending stays flat or close to or declines leading to cash having to repay debt in advance - no cash for replacing depleted assets
company raises cash thru equity diltuing sharebase further

so where does that leave SEA in quick and dirty analysis - the further into 2018 the better as most pundits predicting supply:demand should be balnced again - however alot will depend on how fast all our Texas friends pump for reasons highlighted in previous posts.

Its still atighrope but no doubt market has improved. My ST SP prediction if all stars align is we will see 13c by June18 - if all stars align.

obviously there is alot more thought gone into it but thats just a few points i looking at and will posts more as I c things - of course if dont like what i write pls just block rather then respond.