Hank, re: SEVAN.ol....
I've been digging more on SEVAN to try and understand the economics of their business. Here is what I found so far:
They will have 7 FPSO's in use by 2010. I know that the Sevan 3 was contracted to Oilexco for $370M for 5 years. That translates to $202.7K/day. If we assume that all of their FPSO's contract at the same rate, they will have revenue of $518M/year in 2010. I'm sure assuming a constant day rate for all FPSO's is quite inaccurate but that is the best I have right now. I would bet that day rates will go up over time but I have no idea how much they will increase.
I haven't been able to find anything to guide me on what kind of margins to expect. However, if I assume that their net income is 50% of their revenue and I assume a share count of 200M shares, they will have net income of $1.30/share in 2010. There are way to many guesses in that estimate for me to be comfortable in any fashion. However, even if my estimates are accurate I would think that this would maybe support a double in prices over the next few years. Given the huge uncertainty in my guesses, I'm not comfortable enough with that to say it is a worthy investment.
The one other thing that they have is options for building of 10 additional units. I think that is a very valuable asset.
I believe they have a good business but I can't seem to get a good feel for the economics of the business. Have you developed any financial expectations or are you just investing based upon gut feel? If you have some financial expectations, what are they?
Mike
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