From Interactive Investor BB - Great common Sense PostCruise
You do realise that 70% of production is hedged at $62 right ? Till June 2016 .
Also that at 10$ there will be one enormous shut down by all producers and imply a giant disaster for all .
Just to put things in perspective as lately too many posters on various BBs have lost it
8500 * $62 * 30 days = $15.81m a month from the hedged lot
The rest about 4000 bopd are at the moment earning around $37/38 a barrel so use 37
4000 * 37 * 30 = $4.4m
So basically we are earning $20m .
Now the delta ie oil prices can move to zero till June and we'll still be earning $15.81m
That to me has been totally lost on many . No surprises that the pro's bought 20% of the overall new stock level at 53p !!! The $66m not touched for now and presumably moving to lower debt at the moment or just cash at bank for precaution
Now lets fast forward to 2016 in June
Hedge position lowers to 4000 bopd but for $69 from June 2016 to June 2017 so guaranteed revenues of $8.28m a month , then on say 8500 plus the extra Stella 16k , we have in my view to expect Brent higher than today's . But lets stay bearish and call for $40
24500 * 40 * 30 = $29.4m
Total close to $37m a month once Stella kicks in . So cash flow will be healthy
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My Oil musings
Now on oil I reckon the short trade is crowded. It was smart in the 80/90/100 plus . Now ? risk reward is not that tasty lets face this first fact .
Today I just heard Yellen ,she wants to see a floor on the price and for oil to stabilise . Since her talk prices stop falling and are moving a little up from the lows.
China today called for an end to lower cheap oil - See Bloomberg ( and has see over 10% increase in fuel consumption due to an ever increasing car ownership )
Ecuador , Angola and Nigeria are putting pressure to stop the decline - Reuters
Venezuela is risking a civil war - Any paper
Iran's oil the much talked about, t is actually of poor quality , and depletion rates are huge, so will need a lot of capital investment , so whilst dreams of cash for Iran are big , the reality is a different story . Very old infrastructure and depleting fields will require a lot of money to replace the initial surge . So at low prices and for a while any new surge in production will have a limited life span .
I could go on but I don't see sub $40 by the time our hedge in June switches . And if it is at $40 per barrel with get to earn $37m a month . Enough I reckon to cut down debt . Given that capex will be reduced to a very low figure .
Just my views no advice nor expertise claimed .