|To: Ed Ajootian who wrote (166538)||3/30/2012 11:37:37 AM|
|From: architect*||3 Recommendations  Read Replies (1) | Respond to of 179038|
|"cash flow valuation being much higher than 2P reserves valuation " |
I didn't get thru the sendspace download excercise to view the Credit Suisse report, you'll have to provide their numbers.
off the top of my head, Coastal Energy ~
Cash flow basis I'm using 23k bopd 8.2 mmbo / year x $75 / bbl -
CEN funds flow from operations should be $621 million / year on 23k bopd.
CEN is / was producing 26k bopd that would yield $700 million in funds flow from operations.
Using a 3 - 4 times multiple on - funds flow from operations - yields a full valuation of $25 / share.
CEN has about 118 mmbo 2P oil (2012 off-shore oil reserves) X $19 /bbl + $2.2 billion 2P NPV
CEn has about + $500 MM in 2P on-shore gas -
CEN's total 2P NPV = $25 / share .
Discount the 2P NPV and then add back in risked exploration value, and we're back at $25 / share.
Coastal's Gulf of Thailand light oil exploration portfolio has considerable upside if your a long term investor. Huddleston's past reserve reports for Coastal are 240 pages and model all of Coastal's Gulf of Thailand (GOT) off-shore oil prospects in detail. Huddleston was way off on the modleing of the Bua Ban Main oil field. Huddleston modeled about 600 bopd and the Bua Ban Main wells are producing 300 bopd on sustained production.
As far as depletion, Songkhla and Bua Ban North are high flow wells over 1500 bopd, so depletion is probably in the 18 - 22% range. Coastal has considerable 2P - 3P reserves in Buan Ban North to replenish 2012 depletion. At this popint with Bua Ban South not likely to add much to 2012 - 2013 production, 2012 - 2013 production should be in the 8 - 9 million bbls / year range. 118 million barrels of oil produced at 8 million / year has a reserve life of 14 years. Coastal could in theory produce those 118 million barrels at much higher peak production rates than the current production of 26k bopd, even as high as 40k bopd. 40k bopd or 14 million barrels / year, 118 mmbo will sustain 40k bopd for over 8 years. 40k bopd with a $125 / bbl price deck is a lot of cash flowing. IMO, the 118 mmbo of off-shore oil will sustain long term peak production at much higher than the current 26k bopd, same for the on-shore gas, existing gas reserves could be produced at much higher production flow rates, than existing gas production.
Coastal had just started to ramp up production of Bua Ban North when they moved the rig to Bua Ban South for these four exploration wells. Back to Bua Ban N orth to ramp up production. Coastal can increase production flows using horizontal wells which flow 2-3 times more than vertical wells. Horizontal production wells make the 40k bopd doeable, even with high 18% - 22% depletion rates. These GOT production/development wells are inexpensive and quick wells to drill.
Coastal's 2012 Capital Program is budgeted at $250 million and with + $621 million in funds flow from operations, theres no reason why Coastal can not increase their rig count from 1 rig currently up to 2 or 3 rigs during the 2012 - 2013 time period. 2012 will see Coastal working capital increase significantly as 2012 funds flow from opertions will be significantly higher than 2012 Capital Investment.