RE: NPV106 Aug 2025 20:13
JEBR
Thanks for doing the analysis. We should however be mindful that NPV10 discount rate is an industry standard to enable comparability across multiple projects. The actual discount rate applied by the market in valuing RKH future cash flows at first oil and FID (weighted average cost of capital) will depend on debt/equity mix, cost of debt and the beta on the equity. The WACC of UK NS groups (Harbour, Ithaca etc) are in the 11-12% range.
The NPV valuation also includes the cash flows from phase 2 and surprised that, in total, capex for phase 1 and 2 was a little over $2b - i was expecting something higher. I do think by first oil the share price will start to reflect the wider NFB opportunities and concur that £2+ is realistic.
At £2 per share on first oil, market cap will be £1.8b with debt of approx £400m, so EV of £2.2b for 250m barrels of oil. A value of around $11/ barrel for oil in a relatively low tax environment is very reasonable and compares to $20/barrel in North Sea pre EPL. So could well be higher.