RE:RE:RE:RE:RE:RE:RE:RE:RE:Odd tradingThis is not true:
"BNE has its bank line at $340 million capacity while they had $324 million in net debt (including working capital deficit) at June 30"
Net debt is $310mm including wk. cap deficit.
Cardboard, I undersatnd you have a negative view on BNE, as most of your posts here have attempted to highligt negative attributes and shortcomings on the company. But please do not misrepresent actual acctounting statements.
It's one thing to have a negative outlook and forward perspective for whatever reason about a company, but to the extent that you misrepresent the stated accounts is unfair.
As to your point about ARO - this is the case with any company. I fail to see why that is somehow an exclusive risk to BNE in particular. Their decomm settlements are only a shade over 1% of current FFO annualy. This is peanuts.
But since you bring it up, and I assume you are a CJ shareholder by your posting (I also was previously), there is far more concern to be had about CJ ARO liability seniority, so perhaps you should have some introspection on this regard.
CJ's gross ARO liability is over $650mm vs BNE's $340mm. The differnce, besides this massive $300mm, is a major reason why i am no longer a CJ holder.
CJ's balance sheet ARO is a meagre $122mm, actually less than BNE's.... which is hilarious considering they have over $300mm more - or double the ARO on a non discounted basis. So how is this possible? Well CJ's little trick is that they discount their gross figure at a 7% discount rate, vs 2.2% (risk-free rate) which is common practice in the industry.
The effect is that CJ is discounting the future periods at a far higher rate which reduces the PV value reported per the balance sheet substantially. So that's part of how they report $122mm ARO PV on the b/s, but the udiscounted figure is over $650mm.
The other part is even more perplexing. They have their ARO period going up to 50 years, in line with primary recovery peers. This seems at odds with the nature of their asset base. CJ is a legacy asset and secondary recovery company. Their business model is a lot different than BNE's, or other priamry recovery companies, who develop a profile of new well/new assets every year.
CJ buys mostly depleted legacy assets, and the bet is that they can get enough further years out of the wells before they have to be retired and reclaimed. Thus their well lifespan is naturally going to be lower than other CDN EP peers until reclamation. Which is common sense - their assets are older.
But to compare - CPG, for example has a period of 35 years, lower than peers - likely to reflect the portion of assets they already have under waterflood. BNE's is up to 50 years.
So if CJ has older wells, how are they discounting them over the same span of time as companies with newer wells?
The answer is they shouldn't be.
They are largely under-reporting their liability realtive to peers, IMO, on both the discount rate to PV their liability, and also on the length of the discount period. Either way, it stinks - CJ's wells well not last as long as primary recovery wells.
It's like saying a 75 year old is going to die at the same date as a 30 year old. Possible, but unlikely.
But in CJ's case, they are essentially saying a pool of several thousand 75 year olds, are all going to die at a similar date as a pool of several thousand 30 year olds. That, is not only unlikely, but flat out Bull Shet.
So before you come here to raise alarm (or rather to throw stones..?), you should be looking at your own glass house.