Nando, I beg to disagree. Ultimately the value of the company will be determined by the P&L. So long as they make a profit (Yes, cash flow is very important), this will determine the company's market value. I spoke with an analyst friend yesterday. He has strong knowledge of Texas oil production (he's a former geologist for Shell). He knows about MAD and salt domes and is reasonably confident they will do OK. I am only relaying the story. He suggests MAD's net profit per barrel of oil at present prices is about $A40 barrel, even at small volumes of 5-10 bopd per well. Even if we work on production of 1,500 bopd, this translates to NPBT of about $A20-22M annually, equivalent to a PE ratio of around 10 times. Not cheap but certainly not expensive. I think what is really missing in the MAD debate (I will be critical of the doomsayers as well as the optimists) is some serious number crunching & analysis. It's true that given the low productivity of the oil wells, success is dependent on drilling, drilling and drilling. However, my mate John suggested it is not uncommon for low depth salt domes to produce at rates of <10bopd.
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