Magellan Petroleum Corp. (MPET, Financial) filed Quarterly Report for the period ended 2010-03-31.
Magellan Petroleum Corp. has a market cap of $103 million; its shares were traded at around $1.98 with and P/S ratio of 3.7. Magellan Petroleum Corp. had an annual average earning growth of 3% over the past 10 years.MPET is in the portfolios of Jim Simons of Renaissance Technologies LLC.
At March 31, 2010, the Company on a consolidated basis had approximately $37.6 million of cash and cash equivalents. The Company considers cash equivalents to be short term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of change in interest rates. Cash balances were $22.3 million as of March 31, 2010 and the remaining $15.3 million was held in time deposit accounts in several Australian banks that have terms of 90 days or less. National Australia Bank, Ltd. (NAB) holds 53% of the cash and cash equivalent balance. Although the funds are uninsured, Standard and Poors credit rating of NAB is AA Stable long-term and A-1+ short-term.
When considering our liquidity and capital resources, we consider cash and cash equivalents and marketable securities together since all of these amounts are available to fund operating, exploration and development activities. The balance of cash and cash equivalents and marketable securities increased $1.9 million during the nine months ended March 31, 2010 compared to a $3.6 million decrease in those balances during the nine months ended March 31, 2009. The factors favorably impacting our liquidity and capital resources during the nine months ended March 31, 2010 included cash provided by operating activities of $3.9 million, proceeds of $10.0 million from the issuance of stock, net proceeds of $2.4 million from the sale of securities available for sale, proceeds of approximately $495,000 from the sale of a subsidiary and proceeds of $7.3 million from the sale of the Aldinga and Nockatunga oil fields and certain exploration licenses in the Cooper Basin (see Note 5). Our cash position was also favorably affected by a $5.2 million effect of exchange rate changes on cash and cash equivalents. We expended cash of $7.3 million to acquire an approximately 83.5% controlling interest in Nautilus Poplar (see Note 3), $4.1 million to acquire a 25.05% average working interest in Montana fields, made principal payments of $235,000 on debt and expended approximately $2.2 million in property and equipment expenditures. In addition, a $13.8 million deposit was made for the purchase of 40% interest in the Evans Shoal natural gas field.
Cash provided by operating activities for the nine months ended March 31, 2010 decreased $5.6 million from the nine months ended March 31, 2009. Cash from revenues increased approximately $3.7 million over the prior year. Australian oil and gas sales volume decreases resulting from natural declines and significantly reduced sales to PWC were bolstered by oil sales volumes from Nautilus Poplar. Gas sales also benefited from a 57% net increase in price per mcf, offset by a 14% net decrease in price per barrel in Australia. In addition, accounts receivable decreased due to reduced billings at March 31, 2010 relating to the cessation of Mereenie gas sales to PWC in mid/late February, 2010 creating a net increase in collections over the prior year. Cash from revenues benefited also from a 19% increase in the average exchange rate. Operating cash outflows increased approximately $9.0 million over the prior year due to the pay down of accounts payable of $5.3 million as well as a $993,000 employee termination costs, increased salaries of $375,000 relating to additional executive employees at MPC, the payment of $440,000 in closing costs relating to the July 2009 closing of the YEP investment transaction, increased travel expenses of $348,000, increased director fees of $257,000 related to the addition of two new directors, increased office rent of $211,000, increased consulting costs of $313,000, increased auditing, accounting and legal services of $256,000 relating to the securities purchase agreement with YEP (see Note 2) and the acquisition of Nautilus (see Note 3) and a listing fee of $65,000 for the Nasdaq registration of the additional MPC shares issued in connection with the YEP transaction. Operating costs were also negatively affected by the 19% increase in the average exchange rate. Our cash position was favorably affected, when compared to the same period in the prior year by the increase of exchange rate changes on cash and cash equivalents of $16.1 million resulting from a strengthened Australian dollar offset by a $1.7 million foreign exchange transaction loss.
At March 31, 2010, MPAL had working capital of $35.1 million and has budgeted approximately (AUS) $6.0 million for specific exploration projects in fiscal year 2010 as compared to the (AUS) $438,000 expended during the nine months ended March 31, 2010. The current composition of MPALs oil and gas reserves are such that MPALs future revenues in the long-term are expected to be derived from the sale of oil and gas in Australia. MPALs current contract for the sale of Palm Valley gas will expire during fiscal year 2012. Mereenie contracts expired in January and June 2009. Supply obligations ceased in June 2009, however, there is a reasonable endeavor obligation to supply certain of PWCs requirements through to December 31, 2010 under the provisions of the Mereenie sales Agreement No. 4 (MSA 4). These sales took place into mid/late February, 2010 at which point volumes from the Blacktip field, PWCs other gas supplier, began to flow in earnest. PWCs most recent advisory to the Mereenie Producers (Magellan and Santos) states that Mereenie gas was no longer required. Under the provisions of that same MSA4 Sales Agreement, the Mereenie Producers have advised PWC that pursuant to the terms of the Agreement, Mereenie Producer obligations to PWC under the current MSA4 Agreement will cease effective on September 5, 2010. Unless MPAL is able to sell uncontracted gas, including reasonable endeavors gas not taken by PWC or be successful in its current exploration program, its revenues will continue to be substantially, which will materially affect liquidity. The price of gas under the Palm Valley and Mereenie gas contracts is adjusted quarterly to reflect changes in the Australian Consumer Price Index. Future oil revenues will be impacted by any volatility in the world price for crude oil. MPAL will strive to optimize operating expenses with any reductions in revenues.
As previously discussed, on March 25, 2010, MPAL executed an agreement with Santos Limited (Santos) to purchase Santos 40% interest in the Evans Shoal natural gas field (NT/P48), located in the Bonaparte Basin offshore Northern Australia. Under the agreement, Magellan is obligated to pay Santos time-staged cash consideration equal to (AUS) $100 million (U.S. $91 million equivalent) for its interest in Evans Shoal on or before December 25, 2010. Magellan would also pay additional contingent payments to Santos of (AUS) $50 million (U.S.$45.5 million) upon a favorable partner vote on any final investment decision to develop Evans Shoal and (AUS) $50 million (U.S.$45.5 million) upon first stabilized gas production from NT/P 48. Closing and completion of the purchase is subject to regulatory and other approvals and is expected to occur in the second half of calendar 2010. Based on its available cash on hand, and the expected liquidity to be generated from the Companys Australian and U.S. operations during the remainder of 2010, the Company will need to raise additional debt or equity financing from third parties. The Company is currently working towards new equity financing options to raise sufficient funds to complete the Evans Shoal acquisition and its other requirements for capital resources over the next 12 month period, which are estimated to be approximately $106 million. In the event the Company is unable to make the required payment on or before December 25, 2010, the Company would forfeit its (Aus) $15 million deposit.
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Magellan Petroleum Corp. has a market cap of $103 million; its shares were traded at around $1.98 with and P/S ratio of 3.7. Magellan Petroleum Corp. had an annual average earning growth of 3% over the past 10 years.MPET is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Operating income totaled $4.2 million for the fiscal quarter, still including the downward foreign currency exchange revaluation offset to the Balance Sheet ($0.4 million), also reflects added personnel and asset base in Montana, charges related to acquisition for further consolidation in Montana, and a $1.3 million reduction of gas revenue from Power and Water Corporation (PWC) began reducing natural gas takes at Mereenie. This was offset by a $5.7 million gain on the sale of properties in the Cooper Basin, Australia. Revenue from two recent Montana acquisitions will be reflected on our financial statement in the next (4th) fiscal quarter.At March 31, 2010, the Company on a consolidated basis had approximately $37.6 million of cash and cash equivalents. The Company considers cash equivalents to be short term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of change in interest rates. Cash balances were $22.3 million as of March 31, 2010 and the remaining $15.3 million was held in time deposit accounts in several Australian banks that have terms of 90 days or less. National Australia Bank, Ltd. (NAB) holds 53% of the cash and cash equivalent balance. Although the funds are uninsured, Standard and Poors credit rating of NAB is AA Stable long-term and A-1+ short-term.
When considering our liquidity and capital resources, we consider cash and cash equivalents and marketable securities together since all of these amounts are available to fund operating, exploration and development activities. The balance of cash and cash equivalents and marketable securities increased $1.9 million during the nine months ended March 31, 2010 compared to a $3.6 million decrease in those balances during the nine months ended March 31, 2009. The factors favorably impacting our liquidity and capital resources during the nine months ended March 31, 2010 included cash provided by operating activities of $3.9 million, proceeds of $10.0 million from the issuance of stock, net proceeds of $2.4 million from the sale of securities available for sale, proceeds of approximately $495,000 from the sale of a subsidiary and proceeds of $7.3 million from the sale of the Aldinga and Nockatunga oil fields and certain exploration licenses in the Cooper Basin (see Note 5). Our cash position was also favorably affected by a $5.2 million effect of exchange rate changes on cash and cash equivalents. We expended cash of $7.3 million to acquire an approximately 83.5% controlling interest in Nautilus Poplar (see Note 3), $4.1 million to acquire a 25.05% average working interest in Montana fields, made principal payments of $235,000 on debt and expended approximately $2.2 million in property and equipment expenditures. In addition, a $13.8 million deposit was made for the purchase of 40% interest in the Evans Shoal natural gas field.
Cash provided by operating activities for the nine months ended March 31, 2010 decreased $5.6 million from the nine months ended March 31, 2009. Cash from revenues increased approximately $3.7 million over the prior year. Australian oil and gas sales volume decreases resulting from natural declines and significantly reduced sales to PWC were bolstered by oil sales volumes from Nautilus Poplar. Gas sales also benefited from a 57% net increase in price per mcf, offset by a 14% net decrease in price per barrel in Australia. In addition, accounts receivable decreased due to reduced billings at March 31, 2010 relating to the cessation of Mereenie gas sales to PWC in mid/late February, 2010 creating a net increase in collections over the prior year. Cash from revenues benefited also from a 19% increase in the average exchange rate. Operating cash outflows increased approximately $9.0 million over the prior year due to the pay down of accounts payable of $5.3 million as well as a $993,000 employee termination costs, increased salaries of $375,000 relating to additional executive employees at MPC, the payment of $440,000 in closing costs relating to the July 2009 closing of the YEP investment transaction, increased travel expenses of $348,000, increased director fees of $257,000 related to the addition of two new directors, increased office rent of $211,000, increased consulting costs of $313,000, increased auditing, accounting and legal services of $256,000 relating to the securities purchase agreement with YEP (see Note 2) and the acquisition of Nautilus (see Note 3) and a listing fee of $65,000 for the Nasdaq registration of the additional MPC shares issued in connection with the YEP transaction. Operating costs were also negatively affected by the 19% increase in the average exchange rate. Our cash position was favorably affected, when compared to the same period in the prior year by the increase of exchange rate changes on cash and cash equivalents of $16.1 million resulting from a strengthened Australian dollar offset by a $1.7 million foreign exchange transaction loss.
At March 31, 2010, MPAL had working capital of $35.1 million and has budgeted approximately (AUS) $6.0 million for specific exploration projects in fiscal year 2010 as compared to the (AUS) $438,000 expended during the nine months ended March 31, 2010. The current composition of MPALs oil and gas reserves are such that MPALs future revenues in the long-term are expected to be derived from the sale of oil and gas in Australia. MPALs current contract for the sale of Palm Valley gas will expire during fiscal year 2012. Mereenie contracts expired in January and June 2009. Supply obligations ceased in June 2009, however, there is a reasonable endeavor obligation to supply certain of PWCs requirements through to December 31, 2010 under the provisions of the Mereenie sales Agreement No. 4 (MSA 4). These sales took place into mid/late February, 2010 at which point volumes from the Blacktip field, PWCs other gas supplier, began to flow in earnest. PWCs most recent advisory to the Mereenie Producers (Magellan and Santos) states that Mereenie gas was no longer required. Under the provisions of that same MSA4 Sales Agreement, the Mereenie Producers have advised PWC that pursuant to the terms of the Agreement, Mereenie Producer obligations to PWC under the current MSA4 Agreement will cease effective on September 5, 2010. Unless MPAL is able to sell uncontracted gas, including reasonable endeavors gas not taken by PWC or be successful in its current exploration program, its revenues will continue to be substantially, which will materially affect liquidity. The price of gas under the Palm Valley and Mereenie gas contracts is adjusted quarterly to reflect changes in the Australian Consumer Price Index. Future oil revenues will be impacted by any volatility in the world price for crude oil. MPAL will strive to optimize operating expenses with any reductions in revenues.
As previously discussed, on March 25, 2010, MPAL executed an agreement with Santos Limited (Santos) to purchase Santos 40% interest in the Evans Shoal natural gas field (NT/P48), located in the Bonaparte Basin offshore Northern Australia. Under the agreement, Magellan is obligated to pay Santos time-staged cash consideration equal to (AUS) $100 million (U.S. $91 million equivalent) for its interest in Evans Shoal on or before December 25, 2010. Magellan would also pay additional contingent payments to Santos of (AUS) $50 million (U.S.$45.5 million) upon a favorable partner vote on any final investment decision to develop Evans Shoal and (AUS) $50 million (U.S.$45.5 million) upon first stabilized gas production from NT/P 48. Closing and completion of the purchase is subject to regulatory and other approvals and is expected to occur in the second half of calendar 2010. Based on its available cash on hand, and the expected liquidity to be generated from the Companys Australian and U.S. operations during the remainder of 2010, the Company will need to raise additional debt or equity financing from third parties. The Company is currently working towards new equity financing options to raise sufficient funds to complete the Evans Shoal acquisition and its other requirements for capital resources over the next 12 month period, which are estimated to be approximately $106 million. In the event the Company is unable to make the required payment on or before December 25, 2010, the Company would forfeit its (Aus) $15 million deposit.
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