Ann: Investor Presentation, page-151

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tt2000

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30/07/19

19:37

Post #: 39768634
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Originally posted by cmonaussie ↑

Could be. Certainly true that 10% is low for ke for SEA

However, the measurement was meant to "standardize" (FASB Accounting Standards Codification (ASC) 932) the future cash flow relating to 1P O&G Reserves. Process followed is:

1. Estimate quantity of proved reserves and future periods during which they are expected to be produced based on SEC Final Rule guidelines (which includes the 5 year rule).

2. Apply SEC first day of month prices to the y/e quantity of (1)

3. Reduce by estimates for:
(a) production costs,
(b) costs to develop and produce the proved reserves,
(c) abandonment costs,
which are all based on those year-end economic conditions.

4. Apply future income tax expenses (using y/e statutory tax rates) which is important as it relates to other deductions/credits.

5. Remaining future net cash flows now discounted to PV by applying a discount rate of 10%

There is a little more to it but since its "post tax" and each company has its differences we might well be saying the same thing as (4) is a bit of a catch all.

Great work on the scenario analysis. IMO, we are (again) circling the age old debate about what the true decline rate is.

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@MartianMan

My research has led me with consistent findings as the above post by cmon. Ie. PV10 is after tax.

Happy to be directed to a SEC definition if this is your source?

Separately, to get to the bottom of the reserve issue - Have emailed Eric.
Will post response when i hear back...

Last edited by tt2000: 30/07/19

SEA Price at posting: 20.0¢ Sentiment: Buy Disclosure: Held
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0 Great analysis

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