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3/18/15

Pacific Rubiales (PRE.to) reports its 4q14

Three charts from balance sheet items:

Assets:


 Liabilities:


Working capital:


It's that last one which shows why people are worried about the near-term future of this company. The working cap position of an O&G is different to that of a miner (for example) because a business like this is all about cash flow and velocity of money; You take out debt, drill the well, haul out the oil and sell it for cash, there's no mucking around and you expand by increasing your lines of credit. Which is fine, right up to the moment when the price of oil dumps by 50% on you and you can't pay your near-term liabilities. Working cap takes a hike South and you're suddenly scrambling to try and boot your liabilities further into the future. 

Forget the quarterly profit and loss, it's the balance sheet items that show how an O&G company that was big and strutting just a few quarters ago can go belly-up extremely quickly. If PRE.to can renegotiate its financial debt pile it has a decent shot of a long-term future. If it can't, its only future will be as a case-study for business MBA courses. Sophomore level.