be wary of shorting small oilers, page-4

Hey DSDS, interesting post, if I may offer some slightly different thoughts -


1) DLS has positive cash balance of aprox $90m. Cash position of approx AUD $150 million/Convertible notes approx $160 million (net AUD $10 million debt, although every day the AUD/USD changes)
2) Production is being maintained. Agree
3) Some (not all FY16) production is hedged at about $70/barrel avaerage.   Flat price of USD $60 hedged for 1.45mmbo
4) New wells close to entering production. Agree
5) FY16 capex reduced massively for NO loss in production. Agree
6) DLS has huge tenants in best zones of Cooper basin both sides of state border. Agree
7) Every exploration well is close to established pipelines. Mostly
8) Each successful well is quickly converted into production. Should be, but not always, just look at Vanessa
9) drilling costs are falling. Agree
10) Unconventional energy set to become a big part of DLS future. Possibly, but more likely tight gas and coals
11) 41 wells drilled with 74% success rate.
12) Of 8 recent wells 7 will enter production!! Very high indeed.
13) 22 wells planned including 15 exploration weels.


Not sure if you are keeping a close eye on DLS work program, but the BPT/DLS well in ATP 924 (to be drilling in the 4th quarter) has a possible 50mmbo OOIP, so if that is a success, then DLS will indeed be re-rated. But nothing is guaranteed.