Long time lurker…..first time poster! First off, thanks to all the members of this board who have tossed in their valuable knowledge, thoughts and opinions on VLE over the years, it has been helpful. I’ve been a holder since the dark days of over $4.00 per share. Finally things seem to be moving in the right direction. My two cents on what may be in store for Q3 and looking for any comments, agree or disagree, with my fairly basic analysis.
My assumptions for upcoming Q3:
- 22,000 BBBL/d production
- $85.00 USD average selling price
- OPEX at 22.70 per barrel, consistent with Q2
- CAPEX will be on the high side of guidance at $175,000,000 for the year. Q1 CAPEX was about $34,000,000 and Q2 CAPEX at $33,600,000. This leaves $107,400,000 for Q3 and Q4, divided equally at $53,700,000 per upcoming quarter
- Fixed expenses of $18,500,000. This removes what was hopefully some one-time expenses in Q2.
- Q3 debt repayment of $10,000,000. This could be higher.
- I have NOT factored in taxes. Oh the irony.
- I’ve reached out to IR to find out the specific timing on when the decommissioning obligations might become due, purely from a cash flow perspective. I have not heard back yet, so assuming for now this won’t impact cash in the upcoming quarter.
Based on these assumptions, I have VLE retaining approximately $42,500,000 of cash in the upcoming quarter. Roughly 42 cents a share of quarterly cash growth. By end of Q3, this should bring us to $130,125,000 of net cash assuming nominal changes to payables/receivables etc., or about a $1.28 a share.
Book value at the end of Q2 stands at $231,857,000, roughly $2.28 per share. At a trading price say of $2.50 a share, we are only trading with a slight premium to book value. Using the assumptions above, book value at the end of September 2023 should fall anywhere between $258,000,000 and $288,000,000 – this assumes $50,000,000 of depreciation. The lower end of the range assumes $30,000,000 of non-cash expenses in OPEX, over and above the 22.70 per barrel OPEX. On a per share basis, I expect Sept 2023 BV to be $2.54-$2.83 per share. If the valuation continues to be a slight premium to book, we should see $3.00 per share trading with no other news. Quarterly cash retention of 42 cents a share, added to our $2.50 trading value, also provides some support for this $3.00 target.
If we can continue to retain 42 cents a share of cash, things are looking great from here. I’d take that kind of consistent price increase in share price on a quarterly basis all day long, even if the market isn’t giving us enough credit for the potential cash generation. Turkey deep play is gravy should anything come of this.
The question for me becomes how long our reserves will last with CAPEX of $175,000,000 annually. I agree with some of the previous posters on dividends being premature at this stage. We need to acquire more proven reserves to have the market give us some multiples of future earnings.
Firstworld had expressed some concern on the possible contingent payment to Mubadala, possibly as high as $50,000,000. With respect to FW, I don’t believe this is relevant as it requires crude over $100 per barrel. In fact, I hope we have to pay them $50,000,000.
Just a quick down and dirty analysis, by no means substantive. Take it for what its worth and feel free to critique and I’m happy to update my spreadsheet for comments. Thanks again for all the comments over the years, and profitable investing everyone!