1. Most Discussed
  2. Gainers & Losers
CNX 10.0¢

cash burn problem / oil price

  1. Ousia

    708 Posts.
    With an LNP government, I rated CNX's chances of approval for Blue Gum at around 80%. Under Labor, I think the probability of approval is around 60% – not bad odds, but not the near certainty it was under the LNP.

    The key probem facing CNX now is timing. Even with their reduced cash burn plan and new financing facility in place, CNX are likely to be completely out of cash by November this year. In practical terms, this means they will have to raise more capital by June or July at the latest. If approval is given before then, capital raising will be no problem. But if the new minister takes his/her time to get their head around the project, and a decision is delayed until late this year or next year, then CNX is in real trouble. Without a positive decision on blue gum, CNX may struggle to raise funds even at 1.5c. I imagine the new minister will take a few months at least before they even look at Blue Gum. My 40% probability of a negative decision is due to the likelihood of some community backlash against UCG. labor is historically more sensitive to community/environmental concerns than the LNP.

    The other factor to keep an eye on is the consensus long term assumption about the oil price because the asian gas price (and, eventually, the australian domestic price) is determined in large part (although not entirely) by the oil price. Asian LNG prices are already falling sharply and are expected to fall by a further 30% this year alone. The economics of Blue Gum were not particularly compelling even when high oil/gas prices were assumed last year. If these low oil/gas prices become the new long term norm, I don't see potential funders (including incitec pivot) ever stepping up to the plate for blue gum.

    One final point: Carbon Energy would be wise to take the big photo of Campbel Newman off the home page (news section) of their website; not a good look if the company is trying to garner favor with the new labor government.

Before making any financial decisions based on what you read, always consult an advisor or expert.

The HotCopper website is operated by Report Card Pty Ltd. Any information posted on the website has been prepared without taking into account your objectives, financial situation or needs and as such, you should before acting on the information or advice, consider the appropriateness of the information or advice in relation to your objectives, financial situation or needs. Please be aware that any information posted on this site should not be considered to be financial product advice.

From time to time comments aimed at manipulating other investors may appear on these forums. Posters may post overly optimistic or pessimistic comments on particular stocks, in an attempt to influence other investors. It is not possible for management to moderate all posts so some misleading and inaccurate posts may still appear on these forums. If you do have serious concerns with a post or posts you should report a Terms of Use Violation (TOU) on the link above. Unless specifically stated persons posting on this site are NOT investment advisors and do NOT hold the necessary licence, or have any formal training, to give investment advice.


Thank you for visiting HotCopper

We have detected that you are running ad blocking software.

HotCopper relies on revenue generated from advertisers. Kindly disable your ad blocking software to return to the HotCopper website.

I understand, I have disabled my ad blocker. Let me in!

Need help? Click here for support.