RE: Netback QuestionI can't say htis is my expertise but this is how I see it.
In terms of Kaz., I do not necessarily see the need?½for a railroad.?½ As I understand it, Tethys simply invested in a loading terminal on an already existing railroad line.?½ Tethys just has to ship by truck a shorter distance.?½ They can do this forever.?½ While the fiscal regime is not the best, it is not the worst.?½ Operational expenses (forgetting transportation)?½ are cheap.?½ They use mostly?½ local workers.?½ I have?½printed this excerpt before from March 2011 from Souther Cross Equities commenting on a Kaz. Junior?½?½, Jupiter Energy:
?½"the tax regime remains relatively friendly to oil producers, particularly compared to Russia. Kazakhstan fiscal regime The Kazakh fiscal regime for oil has four levels of taxation: • Mineral Extraction Tax (5-18% based on volumes) but only half the tax if the output is sold domestically. • Economic Export Rent of 7-32% linked to the price of oil. It?½s calculated net of opex and transport costs. • Income Tax, currently 20% but reducing to 15% by 2014 and; • Excess Profit Tax. A marginal tax from 10-60% when the ratio of annual income to annual deductions increases from 1.25x to 1.7x. • In addition, oil producers have a Domestic Market Obligation to sell up to 20% of output at prices 1/3rd of world oil prices. The effective tax rate will obviously depend on a range of factors but is in the 50- 70% range. While high, it is better than the Russian or Indonesian fiscal regimes which effectively take 80-90% tax".
I will assume that TPL will sell at a discount to brent.?½ If we assume they get $100 and the operational and transportation cost are $15.00 per barrel, we are looking at?½ $85.00 before the effective tax rate leaving between $25 - $40. netback per barrel.?½
Now, in Taj, as we have discussed, the netback is an amazing 70%?½ to the joint venture of which TPL owns 51% but only has to contibute 51% of the costs.?½ There is in fact a railway that goes to the capital to about 50 miles i estimate from the current well.?½ Currently, Tethys sells at the wellhead in Taj.?½?½What I am not sure of is whether TPL could sell entirley domestically but Taj. appears to be oil starved but I am not sure about the demand for non-refined crude. If TPL can sell domestically, they should still see a very high price and even with the split ( and only half the operation and transportation costs which we could estimate TPL's?½portion at ?½$7.50 per barrel, then the netback to Tethys would be about?½-?½?½profit of?½ $85.00 per barrel of ?½which TPL gets $29.75 less their $7.50 contribution for?½ a?½ net back of $22.25 per barrel.?½
I am interested in anyone who can use actual figures as well.