Cuts Costs to Ensure Profits
Brisbane, July 4, 2012 AEST (ABN Newswire) - Linc Energy (
ASX:LNC) (OTCQX:LNCGY) today provided an update on the outcome of the review of business operations and resulting budget cuts that was initiated 90 days ago.
Linc Energy has undertaken a detailed review of all aspects of the business with a particular focus on cost saving initiatives whilst driving its core focused commercial outcomes. The outcome of this review has been a reduction of 60 employees across Linc Energy. Approximately 90% of these positions are attributable to the Corporate and Clean Energy divisions without affecting any core areas of the business.
It is worth noting that many of the budget cuts were completed in the Company's Denver and Casper offices on the back of the consolidation of the Company's oil operations, which are now being run out of Houston, with further cuts actioned in the Brisbane office.
Following the restructure, Linc Energy continues to employ over 400 employees across Australia, USA, Europe and Uzbekistan and retains its technical expertise in UCG, GTL and (Co2) EOR. One-off costs associated with the restructuring will be approximately AUD0.5m and will be provided for in the results for the financial year ending 30 June 2012.
The average Quarterly cash burn for Linc Energy over the 12 months to 31 March 2012 was approximately AUD38.2m per Quarter (not including the Oil and Gas division) and this will be reduced to a Quarterly average for next year (2013) to approximately AUD19m per Quarter (excluding the Oil and Gas division - which is self-funding).
Linc Energy's total budget (excluding some oil and gas capital requests) will be able to be fully-funded from the positive cashflows from the USA oil business, which is expected to yield an operational cash surplus of AUD15m for the Company for FY13.
As per the Company's announcement of 2 July 2012, the Oil and Gas division is operating at approximately 4,000 barrels per day (BOPD) (gross) with an average uplift cost of approximately AUD17 per barrel (LOE and Taxes) in Texas. At 4,000 BOPD, the annualised EBITDA for the Oil and Gas division is above AUD65m (assuming a USD90 WTI price, (Linc Energy gains a USD8 premium over WTI for its oil in Texas/Gulf Coast)). By third Quarter FY13 production is expected to be at over 7,000 BOPD and the expected EBITDA will be over AUD120m annualized over 12 months, with oil production anticipated to continue to increase for at least the next three (3) years (not allowing for oil flows from the Alaska Umiat Field).
Together with this increased production from the Oil and Gas business and these announced cost initiatives across the Coal, Clean Energy and SAPEX divisions, Linc Energy is expected to be cash positive on a reoccurring basis for FY13 by AUD15m, excluding any monetization of assets or equity injection, for example a coal asset sale or the proposed China Joint Venture with GCL, which as previously announced, is in its final stages of legal documentation.
Linc Energy CEO/Managing Director Peter Bond said, "The cost saving initiatives were imperative to ensuring that Linc Energy was sustainable on its own into the future and ensures that the core business was focused on delivering fundamental outcomes to the shareholders. These key outcomes include increasing production in the Oil and Gas business, monetization (sale) of key non-core assets, like some of our coal and shale assets, and deliverability of the Clean Energy UCG commercial opportunities like the proposed joint venture in China with GCL. Linc Energy will continue to drive hard cost saving reforms whilst focusing on achieving its core goals".
To view the complete Linc Energy announcement including Graph showing Operational Cash Costs, incl exploration, Ex Oil and Gas, please click the link below:
http://media.abnnewswire.net/media/en/docs/ASX-LNC-243206.pdf
Contact
Linc Energy Limited
T: +61-7-3229-0800
F: +61-7-3229-6800
WWW: www.lincenergy.com.au
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