Everything is still down to interest rates and dilution. I've tried to match FAR's numbers on slide 8 and base all scenarios on this to include debt options.
Making a few assumptions on capital profile (assuming FAR share of CAPEX is $400M
fully debt-funded)
|
Column 1 |
Column 2 |
| 0 |
Capital profile |
$M |
| 1 |
2020 |
100 |
| 2 |
2021 |
150 |
| 3 |
2022 |
150 |
| 4 |
Sum $M |
400 |
Various interest rate scenarios assuming
zero dilution to get the total debt compounds to 2022 as below
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
Column 8 |
| 0 |
$M |
0.0% |
2.0% |
4.0% |
6.0% |
8.0% |
10.0% |
12.0% |
| 1 |
2020 |
100.0 |
106.1 |
112.5 |
119.1 |
126.0 |
133.1 |
140.5 |
| 2 |
2021 |
150.0 |
156.1 |
162.2 |
168.5 |
175.0 |
181.5 |
188.2 |
| 3 |
2022 |
150.0 |
153.0 |
156.0 |
159.0 |
162.0 |
165.0 |
168.0 |
| 4 |
Total debt |
400.0 |
415.2 |
430.7 |
446.6 |
462.9 |
479.6 |
496.7 |
(no corporate overheads assumed)
Annual interest at RFSU:
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
Column 8 |
| 0 |
|
0.0% |
2.0% |
4.0% |
6.0% |
8.0% |
10.0% |
12.0% |
| 1 |
Total debt |
400.0 |
415.2 |
430.7 |
446.6 |
462.9 |
479.6 |
496.7 |
| 2 |
Interest $M |
0.0 |
8.3 |
17.2 |
26.8 |
37.0 |
48.0 |
59.6 |
Convolve everything: Critical here is that because debt is higher than CapEx due to interest, the proportion of cash flow going to pay off capital is greater than the $16.6/bbl. ($65 oil) (I'd note however that my CapEx does not add up to the same - 16.6/bbl * 230mmbls is $3.8B so a small error introduced in this table due to not knowing anything about that $800m of CapEx
)
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
Column 8 |
| 0 |
Interest rate |
0.0% |
2.0% |
4.0% |
6.0% |
8.0% |
10.0% |
12.0% |
| 1 |
Total debt |
400.0 |
415.2 |
430.7 |
446.6 |
462.9 |
479.6 |
496.7 |
| 2 |
in $/bbl |
16.6 |
17.2 |
17.9 |
18.5 |
19.2 |
19.9 |
20.6 |
| 3 |
FCF |
17.4 |
16.8 |
16.1 |
15.5 |
14.8 |
14.1 |
13.4 |
| 4 |
Cash gen/yr |
90.0 |
86.7 |
83.4 |
80.0 |
76.5 |
72.9 |
69.3 |
| 5 |
Minus interest $M |
90.0 |
78.4 |
66.2 |
53.2 |
39.5 |
25.0 |
9.7 |
Numbers are very marginal at $65 oil if the interest rate is at the high end (FAR overvalued for $65 oil).
Zero-interest scenario varying oil price sensitivity.
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
Column 8 |
| 0 |
Oil Pice |
65.0 |
60.0 |
55.0 |
50.0 |
45.0 |
40.0 |
35.0 |
| 1 |
OpEX |
16.3 |
16.3 |
16.3 |
16.3 |
16.3 |
16.3 |
16.3 |
| 2 |
CapEX (loan repayments 0%) |
16.6 |
16.6 |
16.6 |
16.6 |
16.6 |
16.6 |
16.6 |
| 3 |
Government share |
4.8 |
4.4 |
4.1 |
3.7 |
3.3 |
3.0 |
2.6 |
| 4 |
Tax |
9.9 |
8.2 |
6.5 |
4.9 |
3.2 |
1.5 |
-0.2 |
| 5 |
Corporate FCF |
17.4 |
14.4 |
11.5 |
8.5 |
5.6 |
2.6 |
-0.3 |
| 6 |
Interest (0%) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| 7 |
Cash gen / yr ($M) |
90.0 |
74.7 |
59.5 |
44.2 |
28.9 |
13.7 |
-1.6 |
Interest vs Oil price matrix (Cash gen / year for the company after interest/loan) (basically the last line of all the tables of the above)
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
Column 8 |
| 0 |
|
Oil Price |
|
|
|
|
|
|
| 1 |
|
65.0 |
60.0 |
55.0 |
50.0 |
45.0 |
40.0 |
35.0 |
| 2 |
0.0% |
90.0 |
74.7 |
59.5 |
44.2 |
28.9 |
13.7 |
-1.6 |
| 3 |
2.0% |
79.6 |
64.4 |
49.1 |
33.8 |
18.6 |
3.3 |
-12.0 |
| 4 |
4.0% |
68.6 |
53.3 |
38.0 |
22.8 |
7.5 |
-7.8 |
-23.0 |
| 5 |
6.0% |
56.8 |
41.6 |
26.3 |
11.0 |
-4.2 |
-19.5 |
-34.8 |
| 6 |
8.0% |
44.4 |
29.1 |
13.8 |
-1.4 |
-16.7 |
-32.0 |
-47.2 |
| 7 |
10.0% |
31.1 |
15.9 |
0.6 |
-14.6 |
-29.9 |
-45.2 |
-60.4 |
| 8 |
12.0% |
17.2 |
1.9 |
-13.4 |
-28.6 |
-43.9 |
-59.2 |
-74.4 |
Note no corporate overheads are included.
Again: zero dilution, zero corporate overhead fully debt-funded scenarios, ignoring the issue in CapEx figures not adding up (mentioned above).
Around 50% debt at 4-5% IR
may be possible - in which case, there is a large raise or sell down coming, but 100% debt would be effectively classified as junk bond status due to the risk profile related to oil price - rates would likely be in the 10-12% range (with SNE as security) or 15% + range if unsecured, you don't get good rates if you are making the lender carry the oil price uncertainty with no security. Fully funding from debt can effectively be ruled out as an option, the economics confirmed by FAR means it will never qualify for a low-cost loan at 100% debt.
Still too much uncertainty on finance here for me. I'll be running my numbers again once information on finance is sorted. IMO that will make or break FAR as an investment.
(20min delay)