GREY:VFGGF - Post by User
Comment by
ofirmeon Jan 11, 2014 6:21am
212 Views
Post# 22080900
RE:Two Sides To Every Story
RE:Two Sides To Every StoryI think I can reconcile the amount of money the company raised:
The 75 wells the company drilled were as followed:
50 x $5.4M on average = $270M
25 x $3.4M on average = $85M
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$355M
debt = -$128M
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$227M
extraction of values to date (as discounted cash flow):
$150M
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$377M
cost of lands and infrastructures:
-$100M
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net investment in company to date:
$277M
You ask where is this money. the answer is that the first 50 wells will take much longer than
stated by the company (at the time) to become profittable. at $5.4M they will take about 4 years
to recoup the investment (on average they are at end of year two and about to start their first
waterflooding).
The other 25 should be profittable (NPV10 >= full investment) in 2 years. if they manage to really
change the well flow curve, it will become more interesting. they are at end of year one.
cost of these is $3.4M per well.
The company prefered to jump in head first as they started. they could have spent years refining
the methods and going bankrupt due to having some debt and little income (no growth means
no equity coming in).
If the company does not drill for two years (I doubt they will do that...), the cashflow minus
maintanance capex minus interest should get their debt to close to zero (assume $90/barrel
on average).
based on my assumptions, 2016 waterflooding production should be over 1,300,000 barrels.
This is for waterflooding of existng production, so over the next 3 years the company should be
able to generate enough to payoff its debt plus earn over 60% of current equity value.
I do not believe I have seen too many cases like this one.
Disclosure: in case you are still guessing - long. hoping price goes down further to average
down from my current $0.4US cost basis.