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In no way PVR could keep 80% who will give money without pledging some assets. SpotOn Consortium wasn't successful even after taking 50% stake, existing stake holders in what way get benefits if the asset is getting diluted by 15% more. There is lot more to it.
I know, ps!
That did occur to me after I posted my last comment on the subject, but then I couldn't think of how to adjust for it.
If you're right that there could be further dilution, then that complicates the estimate still further.
The main thing is that the project gets off the ground, in which case the share price will be multiples of its current price anyway.
Linn said previously that it's the undiscovered oil below that particularly interests him.
Once the oil is flowing, someone might be interested in finding out what's below - especially if the oil price is approaching $100 by then.
LONGWAIT: "Something doesn't 'add up,' ps! Assuming PVR retains a 40 percent interest, the breakeven would have to be $30.83 to produce a profit share of $560 m. Assuming a breakeven of $26, a profit of $560 m would imply a share of just 34.3 percent.
You've left out the NPV10 discount, LONGWAIT. It depends on the specific cashflows, so requires assumptions about the ramp-up period to max production. I played with some (to me) plausible ones. The net result is that you have to multiply all income by about 60% to get the right value. Using that, the PVR share looks to be about 60% (assuming $26/bbl breakeven). Linn confirms $25 breakeven in latest info doc which I posted below, and says PVR will, in fact, retain 80%.
Probably where I'm going wrong is a) PVR will eventually have to pay tax, after recouping its $240m in tax losses, b) I ignored San Leon's 4.5% net profit interest, c) other stuff I can't even begin to guess at.
So Linn really thinks he can keep 80% ! Amazing if true (but I'll wait till I see it). Also means an extra bonanza if oil stays significantly above $60.
Think the different is capex vs opex
Something doesn't 'add up,' ps!
Assuming PVR retains a 40 percent interest, the breakeven would have to be $30.83 to produce a profit share of $560 m.
Assuming a breakeven of $26, a profit of $560 m would imply a share of just 34.3 percent.
Someone check my arithmetic? Linn says NPV10 on 48m barrels of oil is worth $560m to Providence at US$60 per barrel, according to "internal modelling". That works out a little under $12/bbl. Breakeven, we were told, was about $26/bbl so there's a margin of $34/bbl. Applying a reasonable production ramp-up time of several years, an NPV10 would imply about a 40% discount on the total cash flows. Comparing PVR's $12/bbl to 40% of $34/bbl suggest to me that PVR expects to retain about 60% of Barryroe when the dust settles. That wouldn't be a bad result (if it ever happens). We could do with a bit of an information dump from Linn, though.