some meat with those potatoes???

Was asked to run the ruler over MAD again so thought I would share part of my findings.

Not sure how people on this thread are with their FA skills so will try and explain how I got my numbers in a way that will enable people to follow the process and do their own valuations.

Done a post the other day on establishing a discount rate so won’t go over that again.

Anyways
Sorry for the dragged out post, for those that just want the numbers then feel free to scroll down and if you disagree or have issue with my end results let me know and I shell take into account.

Present value concepts

By its very name, a net present value recognises that time has a significant bearing on the value of money. Money has either more or less value depending on when it is received or spent. A sum of money received now is worth more than the same sum of money received several years in the future. It is not a matter of opinion that money has time value, it is a matter of fact. The fact that we can invest money in the bank and earn interest on it demonstrates that the money invested will be worth more later on. When investing in the share market, often over a period of several years and in projects that can last for twenty years or more. It is important that when choosing an economic indicator it recognises time and takes time quantitatively into account, this is critical for investment decision making on the share market.
The basis for the calculation of present value is the existence of interest – interest which can be earned by putting money into the bank or into some other investment. This is best explained by means of an example.
Say you have $100 and can invest it and gain 10% interest on that $100 P/A. In one year’s time that $100 would be worth $110 and this $110 could be withdrawn and spent. Therefore the current $100 has a future value of $110. The $110 is calculated as follows:-
Future value of $100 after 1 year = $100*(1+10%) = $110
Another way of looking at this is that $100 today is equivalent to $110 in one year's time. In other words the future value of $100 is $110. Therefore future values are obtained by compounding at a given interest rate.

The opposite of this is that $110 in one year's time is worth $100 today. That is, $110 discounted to the present day is $100. In other words, the present value of $110 in one year's time is $100. Therefore, present values are obtained by discounting at a given discount rate. Present values measure what would have had to be placed in the bank today to get a given future value.

Mathematically, the present value of $110 in one year's time using a discount rate of 10% is derived as follows
Present value of $110 = $100 = $110/ (1+10%) ^1

I think that’s is about as good as I can explain the concept of present value

Maverick Drilling & Exploration Limited Breakdown

I used the following estimates for this valuation

*Discount rate = 20%
*OPEX and transport = $7 a barrel
*CAPEX =$230,000 per well
*Tax = 0 (will explain)
*Royalty =25%
*Average production per-well =25bopd
*Average oil price = $90

Estimations explained
Discount Rate
The discount rate is set at a very high rate. Probably some 4 to 5% higher than it should be. The fact that management are local to the area they are conducting their business in and have been conducting there business there for many years alone should drop the rate to 15 maybe 16%. But due to current market conditions I felt it was better to run with a higher rate.
Opex
I believe that the $7 I used on the Opex to be on the high side by some 30 to 40% due to these being unmanned oil fields. But because the figure isn't compounded it has little impact on the overall result. And because the figure isn’t compounded I felt it best to go the higher side.
Capex
As reported
Also I used a discount rate on the capex to the same value of that used in this valuation.
Tax Rate
I used a zero tax rate due to the only state/federal tax rate I could find was 4.5%. There is no point in adding this rate due to the fact it would be very unlikely that it would ever be paid due to capital deductions. I instead increased the royalty from 23% to 25% which after researching both federal and state oil taxes 20 to 23% pending on the age of the well where the average royalty rate. Although it appears to be lightly taxed it should be remember that all royalties are paid before costs can be recovered. Therefore the company wears the costs of development (Capex) and operational costs (Opex) as these costs can’t be offset against a royalty based system.
Royalty
See tax rate
Production rate
As reported
Oil price
Again a bit low but looked for a 12 month average.

Conclusion
Based on the above assumptions the finial share price on Blue Ridge alone stands at $1.56. So based of my best estimates we are a little over half way there on share price on Blue Ridge alone.
You will also notice 2 valuations in the Excel jpeg below. The first valuation highlighted in blue was a cross reference and using the NPV function in excel. The reason for the differences in share price is because the Excel NPV function starts from year 1 and in this valuation it was required to start in year 0.
I am more than happy to pass this valuation over to anyone who would like to go over the numbers to ensure they are correct.


Cheers

Ciggs