Condy at 14.95 US They Should ReconsiderGuidance and BudgetAt current price of Condy @14.95 US, Nymex at $1.65 ( this is slightly pessimistic), NGL's at $8 Cdn, my model shows net-back after all-in expenses of $4.81 per boe ( note last year netback was ~ $18/boe). Annualized cashflow (including good Q-1 prices) is about $490 Million.
If this is right they will need to draw about $400 Million from credit line (leaving about $900 Miliion).
clearly Option 2 in my previous posts should be considered (ie cut capital). Remember if they suspend drilling, they can always ramp up quickly if things prices increase.
Please note:
1. The above analysis shows that they are in no danger of meeting all comitments including debt coverage;
2. They are well equipped to curtail and/or ramp up drilling and completions;
3. Heavy oil shut-ins will dampen Condy demand. I don't know exact numbers but soon Condy storage could fill up with the net effect that some Condy production (and associated gas) has to be curtailed.
I imagine they are waiting on the outcome of rumoured Opec/Russia talks and federal government aid to industry. How MLP handles this will define his tenure. So far so good.
With over 3 Billion people worldwide under lock down, the IEA has estimated demand destruction between 8 and 20 Million bbl per day. Obviously storage will soon fill up and production will be forced to quit. So, even if Russia ans SA agree to cut it will be largely for appearances and to salvage price in the twenties. I think they realize now that they blew it yet again. Bottomline, it will be quite awhile until storage levels are back to 5 year averages after the virus is defeated.
In closing, I hope MLP gets ahead of this, and finally they will weather this just fine.