RE:Intelligent Qurestion...Has anyone figured out....OBE has stated in Q&A during presentation, that their maintance capital is about $200 million.
They forecast $400 million in cash flow at $80WTI.
When asked about cash flow when oil was about $70, the response was that although oil price had dropped, they were getting more than forecast from the change in US/Ca exchange rate, and the reduction in the heavy oil differential - with the net impact being that cash flow was not far off that prior forecast.
We know that their cash flow sensitivity to $1 change in oil is about 8.6 million.
Using the following assumptions, we can calculate how much oil would have to drop before OBE's cash flow falls to their mantance cap ex.
Current cash flow $400 (with $70 oil).
&
Maintence captial $200 million.
That implies about $200 million cash flow over maintance cap ex.
At 8.6 sensitivity, that would mean oil could drop about $23 below $70 before Cash flow would be around $200 million (or equal to maintance capex). (23 x 8.6 = 197.8)
ie, that means oil would have to drop to about US$47WTI for OBE to only have enough cash flow to meet maintance capital.
This is very rough back of the envelop stuff, but you get the idea. It seems the oil price is far above the point at which OBE would have to think about limiting spending to maintance capex only.
It gets better, because if oil were to drop to $47 it would impact the US/Can exchange rate in OBE's favor, meaning the actual oil price drop required to hit OBE's maintance capex is probably larger.