RE:RE:RE:RE:A fine quarter , a little timing difference in cash flowOpex - not capex rose 50% per bbl. Opex is your lifting cost which defines your margins and this came in higher than anticipated at $34/bbl. Management guided to $30/bbl annually but the market got head faked in Q2 when they came in at $23/bbl.
The debt declined but payables increased by a similiar amount - so if you delay paying your suppliers in order to pay down debt what good does that do? Just look at the Adjusted Net Working Capital Surplus line in the press release. It declined $6mm QoQ. What does this mean? There was negative free cash flow - which can be ok if production is increasing but in this case production declined (mostly becasue of Wassanna I know but otherwise call it flat).
Bottom line is shareholders should be concerned about the free cash flow capabilites of the company. With Wassana they can probably do $5m - $10m of more cash flow per quarter than Q3 so lets give them the benefit of the doubt and assume $45mm of run rate cash flow . With an average of $40-$45mm of capital required to be spent to maintain production (management's forecast), what's left for the shareholder?
Management has done nothing wrong here btw - their Q2 was just too strong ($70mm of CF) and now this was a huge let down ($34mm of CF) on a higher realized price ($7/bbl higher). But their guidance has been consistent - they will now need to show the market how they are going to return to generating free cash flow. Not going to guide to a price but this stock is going lower. Those that read my note in the first hour of trading, you're welcome. Those that want to believe this stock has bottomed - Good Luck!