Bigstockpunter The IRR gives the return on the capital invested,...

Bigstockpunter

The IRR gives the return on the capital invested, which as you say is when NPV equals zero. The 38% with oil at $US70 per barrel is well above the cost of capital, so raising capital should not be difficult.

You are right that we should leave the calculations to CNE, as only they know the expected capital outlays and when they are expected to occur. In reality they should also escalate the outlays and incomes into the future as well as discount them back to today's NPV. You could expect oil to escalate faster than other costs, if it becomes in shorter supply into the future, so the NPV calculation can become quite complicated as you need to also form an opinion on the escalation of all the factors of production.

The discount rate set in the calculation takes account of risk, as well as the cost of capital. So the rate used depends on what is trying to be achieved. In CNE's calculation it would be expected to be higher than their expected cost of capital, so 10% would be a reasonable expectation. In their calculation CNE are trying to achieve two things, the expected risk free value and to ascribe a reasonable value to the oil in place, in order to arrive at an expected NPV for the oil in place given the expected time when that oil is to be recovered. We should expect CNE to use the 563 M barrels oil in place when they issue the NPV value, and it would be quite unusual for them not to do so.

I look forward to the next release of NPV, which probably will come when the exploitation plan is released.

IMO & DYOR