Forget all the smart replies, if oil stays where it is today you get nothing.
Hi Raj, look out before cpa38 gives an earful about how you didn't check the 424b; so your analysis can't be that accurate! (Though I agree with you about; oh; 100%).
Page 57, 424B Filing.
"The expected increase in the annual decline rate over the course of this 20-year period is primarily a result of the assumption that no additional development drilling or other development expenditures will be made after 2014 on the Underlying Properties."
If VOC's dev costs don't go away and the price of oil stays at less than $60 a barrel; then VOC is going to halve. It is that simple. I don't think folks are going to be ready for the divy shock that is coming. Btw VOC apparently released an update of operational matters and distribtuions for 2015. They claim that their dev expenses aren't going away anytime soon. Unlike what you said.
1. Production and Property Taxes will be about $1 M in Q1 and Q3, only about $300 - $400 K in Q2 and Q4. The payments vary because of timing of the due dates. Your assumptions include a level $1 M each Q. You're wrong.
2. They've told us that Q1 Development will be high because they simply can't move fast enough to shut down drilling and well improvement in this eroding price environment. They'll cut those costs severely by Q3/Q4. It appears you think these guys will barrel ahead at $3 to $4 M in Development costs every quarter. You're wrong.
In '15, they'll pump about 683 K barrels oil, 475 MMcf gas.. Assume oil at avg $55 for the year, gas at $3.75. Revenues will be about $39.5 M. Expenses will be about $28.7 M. Apply the 80%, back out about $800 K in Admin and you'll arrive at around .45 - .55 per share divy.
And that number is way conservative. They can apply any portion, or all, of their $1 M reserve at any point. Also, the Q1 reported numbers are sales from Sep - Nov .... when oil was in the 70 - 90 range. So, a .60 - .70 divy wouldn't be a shock.
Now, please, read the 424B filing. And if you can't present more rational views on the outlook, then go somewhere else on yahoo to post your junk.
Do yourself a huge favor. Read the 424B filing. Then, shut up and go away. Your ignorance with the numbers isn't adding any value here.
By the way. Merry Xmas.
I'm glad your not my CPA. Based on your analysis if you drill 180000 barrels a qurater at $55 a barrel with costs and fees of 7.5 mil; you can completely ignore the computation and just tell someone that did that a craptaciular metaphore and it doesn't make sense. Instead of seeing that sales was (180000 * 55) - 7500000 = 2400000. Now if there are 17 million share holders and each one gets their fair share; that equals 14 cents. Your charecter is shown to be flawed. But hey based on your example if you buy a house for 250K then you must have bought a car for 250K...
Based on your example: If you buy a house this year for $250 K, then you're paying $250 K a year in rent.
They are spending now to drill and improve wells. That spending all but stops by YE 2016, then they milk the wells through 2030. Development costs today need to be viewed over a 16 - 18 year window.
I thought 7.9% is a little high. It wouldn't halve at that. Forgot though that VOC only keeps 80 % of the profits. So divy would be ((9295000 - 7500000)*.8) / 17000000 = .084 = yearly yield of 6.32% = (.084 / 5.27)*4 . (At that yield VOC will halve if oil stays at $55 a barrel!)
17 million outstanding shares of VOC. Production costs of 7.5 mil. 169K barrels produced.
Cost of a barrel is still 55$
this equates to sales of 169K x 55$ = 9295000. this equates to a divy of (9295000 - 7500000) / 17000000 = .105 . At present stock price of 5.27 this equates to a divy of 7.9%. (IE (.105 / 5.27) * 4)
CPA38 I am showing my math. How is it wrong? The divy will not be .5 for the quarter. If their dev costs don't go away it will be much less. If oil stays at $55 a barrel VOC is going to halve.
If development costs halve by 2016; and production decreases by 6%: then I calculate that the cost of VOC doing business costs 7485164 with a production of 169811 barrels of crude for q4 2015. This corresponds to a break even point of 44$ a barrel. Far from the 30's you claim. At the decreased prodcution and business cost oil would need to be $62 a barrel for a 10% divy yield. If oil stays at $55 for a while, you can still call me whatever you like; but VOC is still going to halve!
Hi CPA38. I have only been at this for a day! There is a fine line between ignorant and idiot. Posting on this site is my attempt to learn that which I do not know and see that which I did not before. I came about my numbers from my analytical abilities I developed from the erudite path I chose. I read for the last quarter that costs just to run things was 9.5 mil. I read that there are 17mil share out there. Given the present strike stock price that is the way I approached it. For last quarter they needed 52$ a barrel to break even. Seems you say the development expenses go buy buy after 2015. From what I read that implies that it will only take 5mil to break even in the future; with production dropping with it. Seems the prudent thing to do is to see if oil stays in the 50's for the next 2 weeks. If you take into account the so called 6% a year production drop; in 5 years they will only be producing 134k barrels. If low oil prices are here to stay then VOC is going to halve.
Hi CPA38. The math was my attempt on my own to determine if I was going to sell SNR and buy some VOC. The financials I pulled where from Yahoo's summary of the company. From what your telling me, it looks like the cost of doing business is going to drop from 9mil to about 5mil by 2016. So it looks like the price of oil can drop a bit and VOC will still be handing out a divy as opposed to nothing. Thanks for the insight. Cramer seems to think that oil has been kept artificially high and that what we are seeing is what is going to stay. He thinks that the Saudi's just don't have the ability to manipulate our energy prices anymore. I didn't realize there was a cap on the oil that VOC could pull out. I wasn't sure when I did my analysis of why the production dropped from 190000 in 2013 to 180000. That's nice to know as well. Thanks. Seems like the smart thing to do is to wait a couple weeks to see what oil does. I know if it stays low or lower that VOC is going to go down further; that might be the time to buy? (Of course if it goes back up to 70, I'll have probably missed out and still be cursing SNR!!!!)
Depletion is accounted for by estimated 6.2% annual drop in production through life of the trust. Life extend to the latter of 12/31/2030 or pumping of 10,600 Mboe. By YE 2014 will be at abut 3,125 Mboe. It's interesting to note that if you take the current status of production, and drop it by about 6.2% annually, you just about wind up right where you need to be by 12/31/2030. So, the pumping activity of this trust is right on target. However, if production drops faster than 6.2% .... that's OK, the life of the trust extends UNTIL they hit the 10,600 target.
Model that. Assume $55 oil in '15, only going up about $5 a year .... NPV is then $7.50 @ 10% discount rate. AND, that assume a very healthy drilling expenditure plan. If your calculations are only showing $4.67 ... then you've made a bad assumption somewhere. Likely, you are keeping well development costs (drilling) too high. They pretty much plan to halt that activity after '16.
memeds2 - your analyses is S**T
Assuming they stay on pace to spend around $12 M in well development in '15, and oil averages around $55 ... divy will be in the ballpark of .40 - .50. So, twomovehigher, your calculations look solid.
If they were to cut the development costs down to about $5 M for the year, and oil stayed around $55, they could divy up to .75 - .80 for the year.