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FAR

2.97%

52.0¢ far limited

KOSMOS spreadsheet valuation and market cap, page-24

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ropoh

563 Posts.

05/07/15

12:58

Post #: 15582830
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Originally posted by ropoh ↑

Spreadsheets, I use them daily.
I don't use them for forecasting / DCF analysis very often but I can say (IMO) the DCF done by Edison and for that matter CNE "times" the CAPEX cash flows in sync with production ie to get an IRR in the twenties at $70/barrel. If the CAPEX cash flows occur prior to production ie when setting up the infrastructure, then the IRR is more like the teens.

This leads to me to the idea that if COP decides to exercise the operator option it may end up financing the set up CAPEX and then reimburse itself from production cash flow. FAR who won't have enough money to go to production and CNE who also might be cash strapped will likely pay for their share of CAPEX by transferring some of their interest to COP. Of course if COP can afford it they may just buy both out.

So FAR could end up fully funded into production but with a much smaller interest. I'd hazard a guess at around 8% if the recoverable resource is about a bill barrels.

I could add further speculative analysis but I really can't be bothered.

IMO etc

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Qualification:

With a WACC at 11%, I can get an IRR in the twenties with NPV at $6 barrel if the compounding increase in oil price is almost triple the compounding increase in all up costs. Most of the CAPEX is spent early in the project whilst the oil price increases over the life of the project.

Guess oil is expected to be in pretty short supply over the coming decades?

IMO etc

FAR Price at posting: 8.7¢ Sentiment: Hold Disclosure: Held
2 Upvote

0 Great analysis

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