Farm out value11 Mar 2023 09:52
From the recent rns and interview we now know that the onshore processing facility is designed for 105 mmcf per day. We also know that the pipeline capacity can take 150 mmcf per day. Chariot are looking at finance options including a farm out , so what kind of value can shareholders expect.
A farm in partner will be buying into an expected cashflow, so it will consider the value to include a multiple of expected ebitda.
We know that base case gas price is $8 mcf and that gas prices in Spain are currently about $19 mcf , so the price is likely to average at around $11 or 12 mcf . To be conservative let’s use $8 mcf.
At 105,000 mcf per day that generates $840,000 gross revenue per day, less royalties of 3.5%=$810,600 x 360 days production per year is $295869000 per year less opex of $40 million is an annual ebitda of $255,689,000 for 100% of the field at the initial production rate.
A farm in partner would likely require 25% . I expect that the minimum value would be at least 4x ebitda of 25% also happens to be 255 million less the 25% of the capex cost brings that down to $105 million as the starting point for 25% interest. That value will increase for the extra 754 bcf of low risk low cost additional gas that will be drilled as part of the development to which I would add a value of $25 million for 25%. Giving a farm out of anchois to yield $135 million, at least , and imply a chariot value of 34 p per share plus the value of a carried multi well exploration play in which also occur at the same time.
That valuation can increase for higher gas price and a higher daily production rate to 150 mmcf per day and a higher ebitda multiple as the first 10 years of production in Morocco are tax free, so it’s a starting valuation which others can adjust for depending on their assumptions.
We should know of a farm out within the next three months.
Strong buy.
Jimmy
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