Repost: Potential NAV for VSTAlthough Maysteeler23 keeps pumping the "VST going to $20" all the time, there is a good possibility that given the recent news release, it will see $20.
Here's the math based on Scotiabanks analyst Gavin Wylie's estimate for NKO. He states:
From Scotia on VST and NIKO
Update Text as of 2SEP09 Niko has acquired an additional 10% interest in its Qara Dagh Block in the Kurdistan Region of Iraq, taking its overall operated interest to 37%. While no payment details were provided, we estimate consideration of US$20M-US$25M will be paid to the KRG from Niko’s cash within the next 60 days. Vast Exploration (VST-V) also acquired an additional 10% interest (37% overall) in the block, under which the KRG will receive 60M shares of the company. With seismic complete, selection of drilling locations is underway and could see the first well spud in early 2010. Based on our NAV analysis, a 400 mmbbl gross (148 mmbbl net) discovery could add circa $15.96 per share in unrisked NAV accretion. We maintain 2-SP on Niko Resources and have raised our one-year target to $86.00 (vs. $85.00), based on our revised risked NAV of $85.51 (vs. $84.81).In our minds, the increased Kurdish exposure is positive, given the discovery size and potential we see in the region. That said, successful exploration in Kurdistan could prove to be a material catalyst for Niko; a key source of NAV accretion and reserve growth.
Gavin Wylie
So he estimates that NKO's NAV would increase by about $15 with a 400mmbbl (148 mmbbl net) discovery in Qara Dagh block. 148m / 400m = a 37% recovery rate. Now that $15 NAV increase is for 400mmbbl, so let's just multiply it all by 2.5 so we get to what a 1 billion barrel discovery would mean: $15 X 2.5 = $37.5. Therefore, if NKO were to make a 1 billion barrel discovery, it's NAV should increase by $37.50.
But NKO has 50 million shares out and VST has 270 million. You take NKO's 50 million shares and multiply it by $37.50 which gives you $1.875 Billion in increased NAV for NKO if they had a billion barrel discovery. So now you take the $1.875 billion value of a 1 billion barrel discovery and you divide it by VSTs 270 million shares. 1,875,000,000 / 270,000,000 = $6.94
So $6.94 is the increase in NAV for VST for each billion barrels they discover. Since the MEAN estimate is for 3.129 billion barrels, just multiply $6.94 X 3.129 and you get $21.72 in increased NAV for VST.
Just remember that it's $6.94 increase NAV for each billion barrels they discover. We can extrapolate to the other higher/lower estimates:
1.674 bbll X 6.94 = $11.61
2.742 bbll X 6.94 = $19.02
4.896 bbll X 6.94 = $33.97
The only caveat in this whole thing is that Scotia's estimate was based on a 37% recovery rate. As per VST news release, they estimate their recovery rate at only 16 to 17% which is very low for the region. Historically the region has a recovery rate of between 30% and 70%.
So let's cruch the numbers at 16.5% recovery rate:
16.5 / 37 = .445
So the NAV for a 16.5% recovery rate is:
$21.72 X .445 = $ 9.66 NAV if it's a 3.129 billion barrel discovery
$11.61 X .445 = $5.16 NAV if it's a 1.674 billion barrel discovery
$19.02 X .445 = $8.45 NAV if it's a 2.742 billion barrel discovery
$33.97 X .445 = $15.11 NAV if it's a 4.896 billion barrel discovery