$16m or $8m a year to rent a temporary plant you won't even own when you've signed a contract with a potential 4yr term sounds a bit over the top,considering,it would still require manning and initial indications were for a considerable period of operation,beyond that on the RG site,once other wells drilled. So you'd still need the earthworks and a lot of infrastructure to pay for,including power,which they ultimately installed their own gas generator unit for. So without that you'd require quite a bit of cash for the power bill,from the local utility on top. So add $2-3m a year plus to run it if it was a simple drive-up hook up and run.Plus the power. Is it making $11m from gas and condensate just to pay those basic costs ongoing and then nothing to show after 2yrs for it,other than a plant you've got no choice but to buy at someone elses price that you may not want?
EGO's cash flow if you think it bad now would have been catastrophic.
Even for me it would be an upfront---NO DEAL.
IN the end the JV vote said build,with funds majority supplied via pre-payment.
Simple logical decision really.$16m for rent plus maybe $4m for infrastructure at a guess and site works isn't far off $20m plus another $5m escalation originally estimated,for a self owned plant,with no further payments.
DYOR+DYODD
EGO Price at posting:
0.8¢ Sentiment: None Disclosure: Held
