Building a green field LNG project is a capital intensive endeavor Say 17-19B USD investment in decades long production is a formable task. Projected ROI is part of the equation. Future revenue is a significant consideration. What to base it on? One measure is Barrel of Oil Equivalent over the life of the project.
Let us use 50.00 USD a barrel Brent as a bench mark. A 6 TCFE consideration would produce a value of consideration in the range of 50B USD for Elk/Antelope.
The 6.25 TCFE is the P10 average of the five estimates of the appraisers.
InterOil currently holds a 36.375% interest in the field. Compute the percentage and you arrive at 18,187,500,000.00 Billion USD.
I find it curious that amount is mid the investment cost of the LNG Project. Is the ROI/Future Revenue on the acquisition of IOC cover the cost of building?
Back to the value again. I am sure I must be missing somthing...so let me discount that 6 TCFE and Value by 50% Now we have 9,093,750,000.00 Billion USD.
Now, I will double down again... lets reduce by another 50%. Now we have 4,546,875,000.00 Billion USD. Now by the amount of shares and....?
P10 with double 50% reductions brings us a share value of 90.9375 USD. Looks and sound familiar does it not?
Barrel Oil Equivalent appears to be a important measure. So much so that ExxonMobil uses it when discussing corporate performance with their shareholders.
Exxon Mobile Annual Report 2015
If you take the time to read the above report you will find close to 15 mentions of Barrel Oil Equivalent.
My favorites are the mention specifically
show as 'Highlights For Shareholders'. Of the seven highlights, two mention 'BOE"
* Proven oil and natural gas reserves(1) additions of 1.0 billion oil-equivalent barrels
* Completed six major Upstream projects with working interest production capacity of almost 300 thousand oil-equivalent barrels per day, highlighted by two deep water projects offshore West Africa and an expansion of the Kearl development in Canada.
Highlight: Developing a World-Class Resource
We have produced 1.8 billion oil-equivalent barrels from Angols's Block15 since 2003, driven by seven major project start-ups.
Discussion of Barrels Oil Equivalent is clearly established as a measure of performance and value for shareholders of Exxon-Mobile.
Exxon-Mobile also mentions its total reserves in (BOE) of 91B for proven,probable,and possible.
(BOE) is also specifically mention in the "Assets" section of the financial report.
How about for InterOil Shareholders ? Lets take look at the Management Information Circular produced by IOC Management.
I saw one line that mentioned the 6,000 CBFT of Nat Gas equals 1 barrel of oil at the burner tip. And that was all folks.
Appears to me that XOM is very happy to talk to their shareholders regarding (BOE) and not at all happy to talk with InterOil shareholders about (BOE). Why is that you may ask?
Optics
This is the classic Emerald City of Oz frame. Recall those who lived in the city were required to wear glasses with green lenses.
What XOM and IOC have done is to dim or shade out a very important conversation regarding the value of IOC. i recommend that the tinted classes be taken off, and gasses with magnification and clarity be tried.
Quote PM CC this week: '...material value not addressed'
I agree.