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Fully listed Russian Oil producer Ruspetro (LSE:RPO) first came to my attention when it issued a disastrous profits warning at 6.3 PM on the Friday of New Year week. It thought no-one would notice? I did. Coming just six weeks after an upbeat trading statement that RNS was a horror. Then there was the announcement of a debt for equity and debt refinancing package. But that fell through too. And today there is another shocker. Those who own shed loads of these shares like my fat friend Evil Knievil keep on telling me that things cannot get any worse. And then they do.
My most recent (of several) sell notes came out at 50.5p after the company shelved its much needed refinancing and you can read that here
Today’s news is woeful. There is a lot of huffy puffy PR flannel about how a new heat exchange system has been commissioned etc etc. Well bully for you. Let’s start celebrating with the Russian vodka martinis now. Er but hang on…
The statement continues:
“Overall Company production of oil and condensate has risen to a current level of 7,100 bopd. We still have a further six wells in the condensate area awaiting activation and are expecting to bring these online in the near future; however, owing to wells recently brought online, which have had lower than expected flow rates and condensate yields, we no longer expect condensate production to reach the previous target level of 4,000 bopd in February.
Condensate production now stands at 1,450 bopd, with most of this production continuing to come from established wells. ”
Ends.
Cripes. Not good. In fact very bad. Given that the revenue net of tax on a barrel of condensate is $44 but $22 on a barrel of oil and that fixed costs are $15 a barrel such a mammoth shortfall in condensate output makes a vast difference to cashflows. This is truly appalling.
I warned before that even if near term production targets were met Ruspetro would not generate enough cash to cover its interest and PLC costs let alone the cost of capex needed to boost output. This company is awash with expensive debt that it is not now refinancing.
You can read my analysis of its rather poor cashflow and debt position HERE
The shares closed last night at 34.5p. This company has now served up three shocking RNS statements in two months. Management credibility is nil. The next scheduled news from the Beast from the East is results ( which will be dire) on March 18th. It really is impossible now to set a target price but for now sub 20p looks about right but I fear that I might be shown to be overly generous in that assessment. If I was Evil I’d be selling at any price first thing.
Tom Winnifrith pulls no punches at all when writing for 10 US and UK websites – you can track his work by following him on twitter @tomwinnifrith and you can register to get a free twice weekly newsletter from him with links to all of his free articles ( around 50 a week) by signing up here
Tom’s personal site which also has links to all of his free to access content is www.TomWinnifrith.com
