Petro Rio S.A. HRTPF

RE: RE: A Billion Dollars More

[stockwatcher111]

I have been reading through the press release as well as previous ones.

Assuming that TNK really does have to pay the intial billion over two years (and there are no "outs" in the agreement), the time value of money has not been accounted for in your math. HRT spent approximately $700 million to exercise the Right of First Refusal when they picked up the 45%. This is money out the door that cannot be utilized or invested. By the time they potentially get paid (over a two year period) and assuming a discount rate of about 10% (this may be high, but is commonly used) this equates to approximately $70-100 million of lost investment income.

Added to that the fact that TNK is not reimbursing any of 2011 expenditures and is carried on the first $175 million of 2012 expenditures kind of puts HRT at breakeven on the deal at best. They better hope they hit the bonus targets to make this worth while. In the meantime they have reduced the value of their treasury and could conceivable be short of money to execute their four reported Namibian wells.

The positive story here is that they now have a partner that when the time comes is well funded and can pay their share of the capital expenses for developing any future discoveries in the Amazon. Forget about the gas for quite a number of years.