lio must be making $$ with oil $41, page-4

extensive lion indonesia analysis Fourro,

Every oil company with production is making money right now.

Before doing the numbers, I want to state for the record that I hate this time-lag sh*t when figuring out an oil company's accounts - the money from selling oil turns up several months after it's pulled out of the ground. Roll on accrual accounting (except that a junior oiler using accrual accounting is just asking for a cash-flow crisis, and cash flow crisis are what kill junior oilers).

LIO appear to run a cold million dollars a quarter for production and administration costs - higher than I'm happy with, but they do have to run their Indonesian operations.

Note LIO appear to produce crappy low-quality oil from Bula, leading to lower prices than the benchmarks we know and love.

As far as LIO goes, IF I read their quarterly right, in May they should be getting about US$250K from Seram, as the revenue comes in from April production (I think they had US$170K revenue from 200kbbl in Jan+Feb, and April had about 300kbbl. March was shut in). Call it A$350K from Seram next quarter.

Bula had a lifting of 56 kbbl in January, resulting in US$1.1m in March, and a lifting of 51 kbbl in April, which should result in a similar amount coming into the books next quarter.

I cant reconcile the A$1.38m number in 'Net cash flows from Operating Activities' with US$1.1m (Bula) + US$0.17 (Seram), unless there is something odd going on with hedging ... it seems out, given a rough 75 cent A$->US$ exchange rate.

The most probable explanation is simply the Seram lifting hasnt been booked yet, which will put the call it A$400K into next quarters figures, with the April lifting going in the quarter after that.

In any case, net operating cash flow was positive A$300K this quarter.

At this point, if I ran Lion, I'd be thinking long and hard about trying to take an axe to that $500K a quarter of admin costs, as a 10% reduction translates into a 16% increase in quarterly net operating cash flow ...

But, yeah, Lion are making money, and will continue to make money from Indonesia.

Assuming they end up as net A$400K from Seram coming on line, that will fund cash calls from A$16m a quarter of work in Oseil part 2, given their 2.5% share of the project.

Ian Whitchurch