Good posting there. That research is quite realistic rather than...

Good posting there. That research is quite realistic rather than being pie in the sky.

I wonder at 4000bpd how long it would take for OEL to pay off its loan? Bearing in mind that initial cashflow from Phase II would go 100% back to the JV until such time that all of the costs are 100% recovered, the cashflow at the start could be quite hefty.

Total guess, at say $50 net a barrel (there will be no royalties payable in the capex recovery stage) at 4000bpd would initially be US$200K a day. Using a 300 day year (allowing for downtime and maintenance or bad weather etc) the first year would be $60M gross and probably see off all of the debt.

If Otto's share of the capex is $62M, then the first $62M of capex will be 100% recouped from initial cashflow and this therefore looks like it will take less than a year to repay the US$37M of debt owing and leave Otto with a full kitty of money again.

Given that also from Phase I they are receiving a net of about $5M per quarter from sales less costs, plus they have at present $23M of cash on hand (and also taking into account it looks like they may get cash receipts for two liftings in the current quarter rather than the usual one which will boost cash further), looks like they have pretty much got it covered.

You can see why KUFPEC wanted to buy into this project. They will put up their own cash (rather than borrow it) and then reap the Phase II cashflows as soon as it starts selling. Nice deal for them.

Once the risk of the Phase II development going OK has passed, that is a pretty sweet financial position Otto is going to be in.