Simply run the numbersIf you run the numbers by punching in a higher average price for natural gas of $2.50 for 2020, you will see the problem. Yes, I know winter prices look to be better than that, but any potential white knight will look further ahead than a few months.
NGL and oil prices won't change much from CKE's last report, and they represent a smaller percentage of CKE's production anyway, so the price for nat gas remains the most importnat factor.
So, using $2.50 gas, CKE would gain about $1.2 million in revenue from that alone, minus about $200,000 in hedging losses. They have ramped production back up, and with better pricing, that should add about $1.6 million in revenue for gas, and $0.6 million for extra NGL/oil production.
So, all told, they should be able to run a quarterly cash flow surplus of about $1.5 million. So, that is a big improvement.
But, the problem is, that is not enough to maintain production, and their debt/cf ratio remains at a very high 5 times.
A much better capitalized company might be able to make these numbers work, so there is some potential for a white knight to come to the rescue.
But I keep wondering about those low formation pressures, and the affect that would have on reserves. Any potentail buyer will have that detailed info, which no retail investor has access to. That would be the make-or-break deciding factor.
At 5 cents, anyone who has been holding probably has little to lose. But if I was an investor looking for the best bang-for-my-buck, I would probably look elsewhere, as there are so many extremely cheap gas producers out there.
Good luck to the honest CKE shareholders, I hope you some out of this smelling like a rose!