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Far spreadsheet 500mb table interim DEC 2015 update, page-43

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ropoh

563 Posts.

13/12/15

00:51

Post #: 16602672
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Originally posted by ropoh ↑

Steps In Developing Senegal DCF Model - Done quite a while ago
AIM: To enter varying oil prices, field size and flow rates to come up with a per share value

Lay out yearly cash flows approximating Cairn CMD pages 56 & 57

Assumptions:

100,000 barrels / day production after 2 year ramp up

Opex $10 / barrel

Profit oil is sales (production X inserted price) minus opex

Profit oil is reduced by Capex each year until Capex fully recovered

Profit oil is taxed at 30% (PSC) and corporate tax is 25%

Decommissioning $2.5 Billion

Apply growth rates to oil price and costs. Discount bottom line cash flows. Vary these rates until IRR = 28% and Barrel NPV = $10 at $70 US barrel. Then test these by varying the oil price to $50 and then $90 and comparing to Cairn CMD

Consider how to vary flow rates, field size and adjust costs accordingly. Decided this is to complex and is virtually a major project which will require sophisticated spreadsheet programming

Consider how to incorporate FAR’s financing of its share of production. Came up with a method of doing this and can combine it with increasing field size and making cost adjustments. This results in FAR’s field interest reducing as a proxy for finance.

Consider how a deal might be structured.

Review and consider reasonableness of assumptions. EG Oil having a compound growth rate of 9.00%. At $70 today a barrel price in ten years is $165. Costs only increasing by 2% compounding, low inflation economy. Discount factor 15%.

This is DCF modelling 101 literally. When comparing oil at $50 & $90 with Cairn CMD there are some minor differences, less so at $90.
Note at $40 Senegal is worth zilch to FAR using this model. This is because the return is less than what they would have to borrow. The spreadsheet breakeven is $43.
I used Excel group function to get a one page fit, hence some years are not visible.

DYOR IMO etc
View attachment 123502 View attachment 123503

Expand

These are the comparisons with Cairn CMD.
FAR Price at posting: 7.2¢ Sentiment: Hold Disclosure: Held
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Far spreadsheet 500mb table interim DEC 2015 update, page-43

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Far spreadsheet 500mb table interim DEC 2015 update, page-43

Top Stories

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