RE:Another point: Sparton holds a natural gas - Today: new highhttps://www.rigzone.com/news/oil_gas/a/22914/Sparton_Reports_Updated_Valuation_on_Offshore_NatGas_Asset/
Changes in the valuation are based on a higher forecast Henry Hub gas price of US$5.39/MMscf as compared to US$4.00/MMscf used in 2004, and a Scotia Shelf condensate price of C$37.50/ standard barrel ("stb") compared to C$26.50/stb used in the earlier valuation. The new calculations also took into account an increase in gas transportation costs into the United States east coast market from $US0.30 to $US0.65/MMscf.
In the overall economic comparison of the forecast value of Chebucto future production, the current net present values ("NPV") of Sparton's working interest share vary from a high of C$88 million for a 2012 startup at a 0% discount rate to a low of C$3 million for a 2012 startup and a 30% discount rate. The NPV's of forecast cash flows, taking into account royalty and production taxes on the reserves, at a 10 % discount rate, and discounted at 15% per year for timing of startup from the 1-1-2005 reference date, are C$25 million ($0.62 per share) and C$31 million ($0.77 per share ) for 2012 and 2008 startup years respectively.
These values are significantly higher than the C$15-21 million or C$0.37 to C$0.52 per share reported in 2004.
It is notable that current Henry Hub spot natural gas prices are approximately US$6.25/MMscf, and that prices for light sweet crude, a product roughly equivalent to gas condensate, currently exceed UD$50.00/stb, both significantly higher than the values used in the new calculations.
DISCUSSION
Management believes this new valuation is relatively conservative based on current spot prices for natural gas and derivative products and that, considering the current state of the energy markets, the prices for these commodities are likely to be substantially higher in the years 2008 -2012.. Clearly the Company is receiving little value recognition for the Chebucto asset.