EEN - Undervalued & Oversold

Cash Flow Block 26

Assumptions
Assume 1 well 2,000bopd
Selling Price $50 per barrel - low . assume heavy oil/or a price reduction vs $60 for lite oil at present
Production Cost $15 (excluding depreciation and amortisation). High. Emerald costs in Columbia less than this.
Capital Cost (to Emerald) $7.5M
Discount Rate 15% for NPV calculations.
Corporation Tax 35% (Capital Allowances are ignored for simplicity)
12.5% royalty.
Emerald share of output 25%

NPV of cashflows over 10 years: $7.8M. Per share £0.07

So on this basis I agree roughly with TGM

Note that, however, Gross Annual Cashflow - undiscounted but net of tax - is around $3.4M - so every two years the one well will pay outright for its entire investment.

If the oilprice rose to $55 and production costs fell to $10 - a net increase of $10 in gross margin, the Gross Annual Cashflow rises $1.05M to $4.45M, NPV to $12.8M and NPV per share from 7p to 12p


This is only 1 well and in the real world company valuations are seldom based on NPV of Cashflows . If they were, most AIM E&P companies would have negative valuations !!! so an interesting but totally meaningless exercise..