Also you mischaracterised the Take or Pay element. The contract is for 100% of the agreed amount. The Take or Pay applies to 78%. The contract therefore provides a floor of $85m pa (EWC share is 50% of that) irrespective of whether the gas is taken or not, but the "face value" of the contract is $110m pa (50% to EWC). This is consistent with the $55m pa identified by PowerPlug.
The Indonesian Oil and Gas segment analysis in 2021 show the margin to be circa 62.5%. I expect the facilities are now fully depreciated. So this looks to be a reasonable margin for cashflow.
So very roughly the contract is worth about $650m from 2024 to 2030 with FCF of about $400m. Half of which accrues to EWC. Assuming EWC can use the cash each year, then I would put the 2024 PV at about $120m to EWC, giving no value for 2030 residual value, and utilising a 20% discount rate to reflect the dire return return on capital by EWC and the risk they will piss it all up against the wall.
In reality the FCF will be controlled by Bakrie and will be largely reinvested into exploration. The value to EWC will therefore be its ability to capitalise on the increased value of the gasfield if the exploration proves up reserves and future offtakes agreed.
Does anyone think that EWC be able to cash out of the project with is undies still on, or will the Bakries take those as well?
Does anyone believe the LNG story anymore? If so, there may be some upside at Wajo, which will augment value at Sengkang. If not then the value of increasing reserves will remain constrained by Sulawesi LPG and electricity demand, and will add value by extending the tail of the reserve life.
So I reckon this contract is worth perhaps 2-3 cents per share (between 60m/3000m and 90/3000m).
It is going to go wild....
EWC Price at posting:
0.9¢ Sentiment: Hold Disclosure: Held
