1H15 reported resultsMIE reported a 1H15 net loss of Rmb -324mln (0.13/ share) on revenue of Rmb569mln and an operating loss of Rmb -114mln. For FY15 we are looking for anet loss of Rmb -214mln (0.08/ share) on Rmb 1,259mln in revenues and anoperating loss of Rmb -51mln. There was an asset impairment charge for Rmb-85mln (1H15) that we had not considered. The write off was against MIE’sChina E&P assets. Without the asset write off, MIE would have reported a1H15 operating loss of Rmb -29mln vs. our full year estimate of Rmb -51mln.The recent fall in oil prices does not bode well for MIE’s 2H15e results.Production and ASPs (average sales prices) – in lineOn 31-July 2015, MIE released its 1H15 Operating Review. Average production1H15 was 11,717 BOE/ day vs. our full year estimate of 11,056 BOE/ day.Average oil production 1H15 was 10,357 bpd vs. our full year estimate of10,403 bpd. The average realized oil price was US$ 51.63/ bbl vs. ourestimated US$ 50.8/ bbl. Average daily net gas production was 8,163mcf /dayvs. our 8,811mcf / day. Average realized gas price sold 1H15 was US$ 1.12/mcf. We are comfortable with our FY15e production estimates for MIE.
The Sino Gas and Energy (SGE) project:In its 1H15 Operating Review, MIE says that a second gas gathering stationwill be operational at SGE in August 2015. Additional gathering capacity willbe 17,000 mcf/ day of which MIE takes 51% or an additional 8,670 mcf/day.This is the case, until the project’s status as a “Pilot project” changes to a“Commercial” project when MIE’s PSC partners will take up their respectiveshare and MIE’s stake is reduced to ~28% of the project. We may be a bit lighton our full year 2015 natural gas estimates which would not be materialhowever from a 2015e P&L perspective.
Oil prices and Long Run Exploration (LRE):The recent collapse in oil prices does not bode well for MIE, which was 93.4%oil and 6.5% natural gas from a total production perspective 2014. AlthoughMIE is moving towards becoming more “gaseous”, it currently remainsmaterially skewed to the oil side. MIE’s US$ 201mln bid for 52.2% of CanadianE&P company, Long Run Exploration, looks rich at 3.1x current market cap,but reasonable at US$ EV 5.37/ BOE of 2P reserve for 52.2% of the company.In its press release to the HKSE summarizing MIE’s bid for LRE, MIE suggestedthat it would finance the bid with either and / or i) additional debt (expensive);ii) additional equity (even more expensive); iii) internal cash flows (fair enough);and or the sale of “non-core” assets. We wonder if MIE’s Chinese oil assetsare now considered “non-core” assets?
1H15 reported resultsMIE reported a 1H15 net loss of Rmb -324mln (0.13/ share) on revenue of Rmb569mln and an operating loss of Rmb -114mln. For FY15 we are looking for anet loss of Rmb -214mln (0.08/ share) on Rmb 1,259mln in revenues and anoperating loss of Rmb -51mln. There was an asset impairment charge for Rmb-85mln (1H15) that we had not considered. The write off was against MIE’sChina E&P assets. Without the asset write off, MIE would have reported a1H15 operating loss of Rmb -29mln vs. our full year estimate of Rmb -51mln.The recent fall in oil prices does not bode well for MIE’s 2H15e results.Production and ASPs (average sales prices) – in lineOn 31-July 2015, MIE released its 1H15 Operating Review. Average production1H15 was 11,717 BOE/ day vs. our full year estimate of 11,056 BOE/ day.Average oil production 1H15 was 10,357 bpd vs. our full year estimate of10,403 bpd. The average realized oil price was US$ 51.63/ bbl vs. ourestimated US$ 50.8/ bbl. Average daily net gas production was 8,163mcf /dayvs. our 8,811mcf / day. Average realized gas price sold 1H15 was US$ 1.12/mcf. We are comfortable with our FY15e production estimates for MIE.
The Sino Gas and Energy (SGE) project:In its 1H15 Operating Review, MIE says that a second gas gathering stationwill be operational at SGE in August 2015. Additional gathering capacity willbe 17,000 mcf/ day of which MIE takes 51% or an additional 8,670 mcf/day.This is the case, until the project’s status as a “Pilot project” changes to a“Commercial” project when MIE’s PSC partners will take up their respectiveshare and MIE’s stake is reduced to ~28% of the project. We may be a bit lighton our full year 2015 natural gas estimates which would not be materialhowever from a 2015e P&L perspective.
Oil prices and Long Run Exploration (LRE):The recent collapse in oil prices does not bode well for MIE, which was 93.4%oil and 6.5% natural gas from a total production perspective 2014. AlthoughMIE is moving towards becoming more “gaseous”, it currently remainsmaterially skewed to the oil side. MIE’s US$ 201mln bid for 52.2% of CanadianE&P company, Long Run Exploration, looks rich at 3.1x current market cap,but reasonable at US$ EV 5.37/ BOE of 2P reserve for 52.2% of the company.In its press release to the HKSE summarizing MIE’s bid for LRE, MIE suggestedthat it would finance the bid with either and / or i) additional debt (expensive);ii) additional equity (even more expensive); iii) internal cash flows (fair enough);and or the sale of “non-core” assets. We wonder if MIE’s Chinese oil assetsare now considered “non-core” assets?
