Your point is well taken, but the royalty interest in these wells is not the whole story. The following is from the web page:
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The Cave Gulch Field. In August 1994, Christian "Ted" F. Murer, now President and C.E.O. of Amalgamated, teamed with joint venture partner
Barrett Resources and drilled the Cave Gulch Federal Unit #l natural gas well in Fremon County, Wyoming. As of May 22, 1995, 246 feet of 481 feet of pay was open to production at 10.2 million cubic feet of gas per day ("MMCF"). The well was selected for the "Best Of The Rockies" award for 1994 by Hart's Oil And Gas World Magazine. The award was judged by members of the Independent Petroleum Association for a superior well that set a trend for oil and gas companies to follow. To date, 10 wells have been drilled in the Cave Gulch field. Five of the wells are producing approximately 54 MMCF per day ($50,000 per day). Two wells are being tested and three are awaiting completion by Barrett Resources. The # 8 development well on Cave Gulch field tested a useful flow of 20.3 MMCF.
Amalgamated is currently raising capital for drilling additional wells on the Cave Gulch field where it holds a 640 acre lease, and nearby Boone Dome field for which it holds several leases totaling 2,600 acres.
The Boone Dome Project. Along the northeastern margin of the Wind River Basin in Wyoming, the older rocks of the Casper Arch have thrust out over the younger sedimentary rocks in the basin. The Cave Gulch Unit now being developed by Barrett Resources Corp. is a 440 acre block in Township 37 North, Range 86 West. The Boone Dome project area is some 12 miles southeast in Township 35 North, Range 85 West. At present, Amalgamated has approximately 2,600 acres on the Boone Dome project area and is competing for additional acreage with other operators such as Barrett Resources, Prima Energy, Chevron, and Hunt Oil Company. Hunt Oil is drilling nearby and to the northeast. The Company believes the potential for development of significant oil and gas reserves at depth in the Boone Dome project area is very promising, especially in light of the fact that the Company will be able to evaluate the geologic reports and results of Barrett Resources and Hunt Oil in determining which areas to drill.
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Working with your numbers:
$157.50/day x 365 days/year = $57,487.50 royalty/year per well.
May we assume that royalty income has no ongoing costs involved for AXPL?
=> $157.50 x 365/3,650,000 shares outstanding => $0.01575/ sh/ well
A hundred wells at this rate of return (participation in digging a 100 wells does not seem unreasonable to me) => $1.50/sh
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The above assumes that all future contracts also will be for a 2% royalty.
We have not mentioned their "gold property" in Nevada. |
