Coniagas Battery Metals Inc. T.COS

RE:production -- oil price -- share price

[namsoc]

Pick Your Price

A few posts back I posted the distributable cash flow for COS for a range of SCO prices and production.  Vermada has raised the question, “What SCO price is being reflected in COS’s price for a range of productions?"  This is not an easy question to answer since there are a number ways of looking at it.  Below are two possible ways and three answers to consider.
 
One way is to calculate the Net Present Value (NPV) of the future distributable cash flow over a period of time.  Since COS has a very long reserve life, I picked 40 years.  One of the main issues with calculating the NPV is the selection of the discount rate.  For example, “What is the present value of $100 if it were given to you in 2024.  Clearly the answer is dependent of the discount rate selected.  The higher the rate, the lower the value today.  Typically when the financial analysts calculate the Net Asset Value (NAV) of a company they use 10%.  The higher the discount rate used, the lower the NAV and similarly for the NPV. 
 
In the 3^rd and 4^th tables below I have calculated the NPV of COS's distributable cash flow for a 5% and 10% discount rate to show the effects of using different rates. For instance at $85 and 110,000 b/d, COS would be worth $20.98 assuming a 5% discount rate and $12.03 using 10% discount rate.  Today’s closing price is somewhere in between.
 
The other approach, which I think is more reasonable, is to say the I want a stock that will pay me a 5% dividend every year.  In that case, the stock price is basically 20 times the potential divy.  The share price for this case is given in the last table.  Looking at today’s COS price, the implied SCO price falls into the $75 to $80 range and somewhere around 110,000 b/d of production

I hope that things improve tomorrow.

Namsoc
 

Yearly Distributable Cash ($)
Syn Production	272,200	299,400	326,600
COS Production	100,000	110,000	120,000
SCO Price
90	1.17	1.47	1.77
85	0.95	1.22	1.50
80	0.72	0.97	1.23
75	0.49	0.73	0.96
Yearly Cash Flow  ($)
	100,000	110,000	120,000
90	2.00	2.30	2.60
85	1.77	2.05	2.33
80	1.55	1.80	2.05
75	1.32	1.55	1.78
NAV at 5%
	100,000	110,000	120,000
90	20.13	25.27	30.42
85	16.35	20.98	25.79
80	12.40	16.69	21.16
75	8.46	12.58	16.53
NAV at 10%
	100,000	110,000	120,000
90	11.54	14.48	17.41
85	9.39	12.03	14.77
80	7.14	9.59	12.13
75	4.89	7.24	9.49
5% Yearly dividend
	100,000	110,000	120,000
90	23.40	29.40	35.40
85	19.00	24.40	30.00
80	14.40	19.40	24.60
75	9.80	14.60	19.20