RE:Gas processing plant worth $100 millionAs discussed previously, replacement value is well above $50 million.
This is a very strategic plant as it is the only one in this region and processes nearly all of the gas from the offshore F virgines gas field.
For those who dont know, a gas processing plant receives raw gas from which it removes all impurities from it ( water sulpher etc ) and then strips out the natural gas liquids ( butane propane etc ).
The dry gas is then processed and fed directly into the customer pipeline.
Annually, the FV gas plant processes about $300 million of raw gas.
RPT charges a processing fee of $0.30 per mmcf, and its net margins ar $0.22 per mmcf.
Remaining plant life is at least 20 years.
The best valuation to apply to this plant is to treat it like a very premium gas producer.
These trade above 6 times annual cash flows.
Premium because any gas producer ( or oil ) must use its cash flows to find and develop new gas reserves.
The gas plant however has an assured supply, so its cash flows are unencumbered by the need to use those funds for replacing finite reserves.
Plus it gets all the benefits of price increases.
So, at $5.5 million in annual cash flows, the plant is easily worth $33 million US or about $1.50 per share in C$.
It just shows you what a sh##t kicking this stock took over the past 2 years due to its unfortunate drilling problems with VP first development well which drove it into a negative WC situation.
Now, things have turned around considerably and the future looks very bright.
Hopefully, we shall see the new website presentation before any material development is announced.