RE: ChatGPT5 response to "Mako deal is NOT worth $279 milion to EME"9 Aug 2025 09:15
Great — I ran a short back-of-the-envelope model using the contract details published in the RNS (total volume = 392 TBtu, contract to Jan 2037) and Empyrean’s 8.5% interest. Sources: Empyrean RNS / Investegate and industry write-ups.
Below I show the math, the assumptions, and a conservative net estimate to Empyrean (EME).
Back-of-envelope estimate (steps & assumptions)
Inputs from the announced GSA
• Total contract quantity = 392 TBtu (i.e. 392 trillion BTU).
• Empyrean working interest = 8.5%.
Conversions / baseline:
• 1 MMBtu ≈ 1,000,000 Btu → 392 TBtu = 392,000,000 MMBtu.
Price scenarios (ICP/Brent-linked pricing — unknown, so I use a range):
• Low = $4 / MMBtu (very low domestic price)
• Mid = $8 / MMBtu (reasonable oil-linked / regional mid case)
• High = $12 / MMBtu (premium / high oil index case)
Gross revenue (all partners) = MMBtu × price.
EME gross share = 8.5% × gross revenue.
Deductions (simple, conservative % assumptions — you can change these if you want a different drain profile):
• Combined capex/opex/cost recovery and other project costs — I assume 60% of gross (operator will recover costs and pay operating costs).
• Royalties + taxes + other government take — I assume 30% of gross.
(Those two together remove 90% of gross in this simplified model — leaving ~10% of EME’s gross share as free cash distributed to equity over the contract life).
— This is intentionally conservative; real PSC arrangements are more complex (cost recovery limits, ring-fencing, corporate tax, profit share, uplift, timing of cost recovery, etc.). Use this as a quick sanity check, not a full fiscal model.
Results (rounded):
• Low price ($4/MMBtu)
– Gross total ≈ $1.568 billion.
– EME gross share (8.5%) ≈ $133.3 million.
– Estimated net to EME after assumed costs/taxes (~10% of EME gross) ≈ $13.3 million.
• Mid price ($8/MMBtu)
– Gross total ≈ $3.136 billion.
– EME gross share ≈ $266.6 million.
– Estimated net to EME ≈ $26.7 million.
• High price ($12/MMBtu)
– Gross total ≈ $4.704 billion.
– EME gross share ≈ $399.8 million.
– Estimated net to EME ≈ $40.0 million.
Takeaway / answer to your statement: Correct — Empyrean is very unlikely to receive anywhere near $279 million of clean, net cash immediately (or as simple gross) unless you define $279m carefully.
If someone quoted $279m as EME’s gross share, that would imply a whole-project gross of ≈ $3.28 billion (which is in the same ballpark as my mid case). But once realistic caps, opex, taxes and cost recovery are applied, the net cash equity that flows down to EME over the life of the contract is likely an order of magnitude lower (low tens of millions USD in my conservative scenarios), not hundreds of millions.
If $279m was claimed as net cash to EME, that looks implausible under normal PSC cost/recovery and tax profiles unless prices, timing, and fisc
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