POE.V - 5 year estimate done by "nutsaboutgolf" a couple weeks ago:
Posted by: nutsaboutgolf2001
In reply to: None Date:11/12/2007 12:59:45 AM
Post #of 1505
POE Financial Model
By the way CVN closed up 10 % in Australia today so that should be a good sign for POE.V tomorrow.
I built a 5 year financial model of POE's Thailand operations. Over that period, I assumed 6 wells would be drilled per quarter at a cost of $800,000 each. All dollars are US. Well decline rates are similar to those used by Hartley's. See the Carnavon web site. Others inputs are an average crude oil price of $80, operating costs of $7 a barrel, transportation of $2 a barrel and royalties of 6.5 %. All cash flows are before tax. I have fully expensed the drilling costs (i.e. a cash outflow) in the quarter incurred. The two major cash flow drivers of the model are the drilling success rate and the average initial production of a successful well. I modelled drilling success ratios of 40 %, 60 % and 80 %. I modelled initial production from successful wells at 1000 bopd, 1500 bopd and 2000 bopd. At the current price of $10.38 (Friday's close), the current price to end of 5th year annualized cash flows ranges from 1.26 (i.e. the current price is 1.26 times the annualized before tax future cash flows) to 0.31!! The 1.26 of course corresponds with the most conservative assumptions (i.e. 40 % success rate with successful wells commencing production at 1,000 bopd). I personally believe an 80 % success rate with an initial average production of 2000 bopd is more likely and if true that means that POE is selling for 31 % of the annualized before tax cash flows likely to be earned at the end of year 5. If instead of 31 %, POE were selling for 5 times the annualized before tax cash flows, then it would be selling for about $167 a share (i.e. (5.00/.31) x $10.38). While all of this sounds wildly speculative, drilling success rates are currently very high and initial production rates as reported (1265, 1480, and 1920) have all been chocked back with comments that management believes these wells are capable of much higher initial production than reported and in many cases wells have been drilled through multiple pay zones and only one zone per well has been tested which of course means even greater production or more prolonged production from each well.
AI
