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Far spreadsheet 500mb table interim DEC 2015 update, page-44

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pj

2,090 Posts.

13/12/15

04:01

Post #: 16602824
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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

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Hi Ropoh

The entries in the table at the bottom of your post for the US$40 oil price certainly seem to give new meaning to the JV's stated “Minimum Economic Field Size” of 200mb???

Long time wondered why Cairn do not seem to state any oil price assumption attached to this....

In the end I guess that in the case of oil prices remaining
pj
Last edited by pj: 13/12/15

FAR Price at posting: 7.2¢ Sentiment: None Disclosure: Held
1 Upvote

0 Great analysis

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Far spreadsheet 500mb table interim DEC 2015 update, page-44

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Far spreadsheet 500mb table interim DEC 2015 update, page-44

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