numbers count - sharks v aussie, page-3

Hi Jimmy,

The Bakken discount applies because of glut shipping to Cushing. It should not be permanent. Some producers (EOG) rail to LA to get LLS pricing.

I would answer NPV as follows, pasting from several sources:

"An alternative is the Net Asset Value (NAV) model, which streamlines the traditional DCF and makes it more
applicable to oil & gas companies."

"A NAV model assumes that the company never increases
its existing reserves, so there is no additional CapEx in
future years beyond what is required to develop existing
reserves."

"The discount rate of 10% is the standard used in the oil & gas industry and what you always see in companies’
filings."


The reason I did it for only 2 years (8 qtrs) was to show that well is economic - its pretty much the payback period.

Using 2.5% is roughly equivalent to 10% per year - its discounting the cash flow


To highlight, I have run different scenarios, but lets keep it at the IP 500 bopd. An 8 Year NPV using 10% discount and keeping everything else the same is about $7.9M. Take away from that your initial capex of $4.5M and profit is $3.5M for your investment.

And for those interested, Year 8 produced a total of about 20,000 bbbl or about 55 bopd and a cumulative total of 302 thousand barrels (estimated) which if anyone is taking notice is higher than Enercoms curve after 8 years.

Again that is using my reference Bakken decline curve.

Might be ready for a refrac by then to boost production

You could get smarter and have variable revenue/expenses for first say 3 years (using hedging and CPI index) and then constant to end point.