Mira Resources Corp V.MRP

Valuation? Sale or Production?

[TeTsuo36]

Hi all,

MIRA has a new presentation up on their site, with an updated development plan and cash flow forecast.

I ran the capex and cash flow through a 10 YEAR, 10% NPV model and here is the result:

After tax NPV of $229m, 64c with 358m shares in issue (double current fully diluted float). Based on the max current recoverable 2C (TSB-1) of 20mstb and initial capex only.

https://www.miraresourcescorp.com/i/pdf/presentation.pdf

MIRA RESOURCES NPV 10%
				NPV
Cost of Capital (%)	10.00%			208,088,136
Market Capitalisation Premium over NPV (%)				10%
Market Capitalisation ($)				228,896,949
Shares in Issue (m)				358
Projected Share Price ($)				0.64
MIRA CASHFLOW AFTER TAX/LOAN (PG12)
	C/F
0	-105,000,000	1.10	1.00	-105,000,000
1	31,443,230	1.10	1.10	28,584,755
2	59,800,727	1.10	1.21	49,422,088
3	79,428,112	1.10	1.33	59,675,516
4	54,368,844	1.10	1.46	37,134,652
5	58,412,263	1.10	1.61	36,269,420
6	55,564,179	1.10	1.77	31,364,530
7	45,711,720	1.10	1.95	23,457,340
8	44,147,691	1.10	2.14	20,595,224
9	50,935,666	1.10	2.36	21,601,695
10	12,924,401	1.10	2.59	4,982,916

Assumptions:

I increased shares in issue to 358m, double the current count. This would obviously be open to debate. But I worked on a 50/50 debt to equity split of $105m, because the cash flow has $71m of loan repayments included, so maybe a $50m debt principle. Another 179m shares at a 30c average (over time) is $53m, about 50% of required cash to get us to 2 well production.

I used only the $105m initial capex. In future years in the MIRA cash flow there are 3 further drills TSB4, 5 & 6, MOPU and pipelines. I excluded this capex ($220m) as it does not increase production to the level you would anticipate, from the amount development money being spent. Indeed, looking at the production uplift, there would be no point spending any of that money on the basis of 20mstb recoverable.

I think this is due the fact that MRP are tied to strictly modelling ONLY to the maximum 20mstb recoverable under NI51 rules from TSB-1 results.

Upside:

As noted the production in the MIRA CF is based only on the 20mstb in the current resource estimate, so only from TSB-1 data, over a ten year field life. Until another well is completed, this is all they can model on. Summarised below:

Annual Production	BOPD
654,000	1,792
1,240,000	3,397
2,149,000	5,888
2,968,000	8,132
2,788,000	7,638
2,625,000	7,192
2,471,000	6,770
2,327,000	6,375
2,192,000	6,005
584,000	1,600
19,998,000	TOTAL

This level of production (48% net to MIRA) looks to be achievable from potentially TSB-1 and TSB-3 alone, if I put credence into the contact I have had with Management (2,500bopd from TSB-1 /4,500bopd from TSB-3, described as highly prudent). There looks to be considerable upside from further resource/reserve increases from further drilling, starting with TSB-3. The NSAI P50 case only covers a portion of the anomaly and we have other prospects in the acreage.

To think of it another way, look at other producing companies. If you also assume that drilling more wells will increase OIP, reserves and BOPD as the field parameters are expanded (as it as for say Mart), there is no reason (imo) to think we could not reach a similar market capitalisation ($500-$600m), on production of off-shore 10,000bopd (Mart, June 2012 = 9,351bopd, on-shore, associated issues bunkering/security, upside from new wells they are drilling). Same region, similar marginal field fiscal terms etc…etc… anyway why not?

If that was the case there would be no reason not to see £1-2 a share in the future. If a decent bid is not forthcoming, I think it is more advantageous to finance and go for it. The most important part of the FirstEnergy Capital NR for me was “maximising shareholder value”, I can see no benefit at all in cheap fire sale of MRP, that would be 100% contrary to our best interests. JM has spent $109k on stock since March in the open market, ave. 22c. I would imagine he would also like a decent return in capital employed?

Please rip this to pieces, there is a whole lot of conjecture in here from me, but I thought I’d have a go anyway. IMO/DYOR.

[peakoilinvestor]

Thanks TeTsuo! Finally the other side of the discussion appeared based on some tangible calculations. As you said there are a number of assumptions that everyone can have different beliefes about. However, the most interesting part of these calculation is, as you also mention, that there is a considerable upside. Hence, even if dilution becomes greater than you assume, the $0.64 share price may

[TeTsuo36]

Hi, there is the possibility the financing aspect may not be a big problem. Last 2 NRs and presentation talk about Nigerian bank debt financing. Presumably this is leveraging on the reputation and contacts of our Chairman (Equinox). We could be in a stronger position than we think there. If you get the $50m debt, the equity side will flow without issue. IMO. Risks here, but not what

[Mlachake]

Thanks TeTuo, you have some numbers now for all to see. Basing this on the least possible resource as per 51-101. So in an event of further drilling and revising the resources upwards, and in an event of higher oil price and secondary recovery. This field is definetely worth at least what you qoute to any potential suitor, more if you are the adjacent company that already has the infrastructure to

[investpro2]

TsTseuo, I wanted to thank you for taking the time and making that detailed post.  I do note that MRP in their cash flow has slide 13 of their corp presentation has noted: 48 month amortization loan starting in 2013 loan repayment of $8M climbing to $17M in 2014 onwards I view MRP plans  is towards financing their capital reqmts and less so with equity Thanks again