Maybe (and I would hope) BRU have already taken the decision to announce a recommence production date and efficient transport plan next week before the AGM. Whether they have taken that decision or not, surely it makes sense to hedge a proportion of production? Particularly if that decision is in the balance. With Brent trading $45-46 this week post Doha and BRU's higher grade selling price a few dollars on top of that, clearly production at these prices is profitable, (anyone care to suggest what break even is assuming new transport efficiencies?) so why not lock in some of that profit now to remove all doubt about the cash position?
eg SXY hedged 400k barrels, 1/3rd next fin year's production at US$45 minimum, ie they still get full upside, costing $2.5m up front. Sounds like a good deal? They are up 150% off Jan low, zero exploration going on, not much likely this year, just pumping it (and huge gas upside not remotely priced in.)
Let's say BRU produce the 3000bopd target only, 1.095mb pa, so if they can sell it for US$48 , Au$68.25 a barrel, that's $74.75m to the JV, $37.37m pa to BRU - (after ramp up to 5000bopd, Au$62.28 pa to BRU)
So, I think POO goes to $85 by Xmas, so you can nearly add those numbers again as pure profit..., but wouldn't it be a sensible insurance policy for a few $mill to guarantee we get up,and running right now without limiting upside? What's good for Ian Davies at SXY should be good for Eric...
And who wants to tell me what BRU's SP goes to when they have Au$125m cashflow from oil next year?
BRU Price at posting:
23.5¢ Sentiment: Buy Disclosure: Held
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