Trillion Energy International Inc. C.TCF

CEO Arthur Halleran: How NVP and NVP10 are Calculated

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How are NVP and NVP10 Calculated

Jan 28, 2022

Dear Shareholders,

We have questions from shareholders as to what is NPV10 and how is it calculated, as it is frequently mentioned in our news releases and filings.

The required rate of return (RoR) is used as the discount rate for future cash flows to account for the time value of money. A dollar today is worth more than a dollar tomorrow because a dollar can be put to use earning a return. Therefore, when calculating the present value of future income, cash flows that will be earned in the future must be reduced to account for the delay.

NPV10 has a discount rate of 10%/year for future cash flow. For example, if an investment gave you an actual (undiscounted) cash flow per year of $1000/year for five years would give a value of $5000, a 10%/year discount rate would give a value $3,790.80 and for a 5%/year discount rate would give a value of $4,329. There is a formula to calculate the value.

If the NPV of a project is positive, it means the project is profitable. The dollar value of the profits discounted by 10% per year is the NPV10 value.

So the NPV 10 for the SASB gas field is a method used to calculate today’s dollar value of all future cashflows generated by net gas sales after all costs including capital investment, operating costs and abandonment and decommission liabilities for the gas production assessed.

Some people want to know why the NPV on SASB is so high. As the platforms, gathering system and processing facility are already paid for and no new capital is required to build same, this is a great savings and yields a higher NPV. Higher gas prices also yield a higher NPV.

For the last updated third party reports done for SASB illustrate the NPV at different discount rates (0%-10%) for the summation of the 2P reserves and Best Estimate resources:

1) Undiscounted – actual future cash flow = US$ 241.3 Million (CAN$ 307 Million)

2) 5% discount rate for future cash flow = US$ 200.5 Million (CAN$ 255 Million)

3) 10% discount rate for future cash flow = US$ 169.4 Million (CAN$ 216 Million)

Customarily, a 10% discount rate is used. However, some companies use a 5% discount rate.

The above illustrates what the SASB gas projects are worth in $ after development capital, after operation costs, after decommission/abandonment costs and with the resulting cash flow discounted.

The NPV10% and 5% illustrate the SASB projects are very positive.  

Arthur Halleran
CEO & President of Trillion Energy

About Us

Trillion Energy is an international gas and oil producer. The Company has a simple clear strategy to add value to shareholders by developing extremely profitable proven non-produced gas reserves on the SASB gas field through existing infrastructure and facilities commencing 2022.

So far the SASB field has produced US$355 Million gross revenue (100% interest) from 4 gas pools. With current gas prices at US$9.50, the field will produce an estimated US $800m gross revenue (100% interest) through a 17 well program targeting low-risk resources and reserves over the life of these wells. 

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ON BEHALF OF THE BOARD DIRECTORS

Arthur Halleran
Director and CEO

For investor inquiries or further information, please contact: 
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Arthur Halleran:
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Corparate Offices:
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Visit our Website: trillionenergy.com
 

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