Nickoo, According to my calculations you are correct all the way! The only expenditure they have other than production,transport,wages (or emoluments............I love that word!) etc..............is their intended exploration and development of similar resources. The royalties just announced in the quarterly from Ship Shoal are just an ongoing royalty stream with no costs associated. I have assumed that broadly speaking they have about a 3 year life (without further expected increases to the resource) at West Cameron which implies a cashflow over the next 3 years of around $1.50 at current gas prices. Most of this cash will reach the bottom line assuming they have plenty of tax losses to write off. The question now is how good are the other leases/royalties they hold and if (as I believe) they have plenty of room for similar production in other areas this cashflow could be for far longer than 3 years. Then the discounted value of future cashflow will become positively scary!
Cheers,
Ed.
PSA Price at posting:
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