Hickory, I am not an expert on politics, so I'll stay with the economics.
You are a systems analyst and you will certainly appreciate a systematic approach. I suggest that we break the beast into four segments:
A.RESERVES
B.UPSTREAM
C.DOWNSTREAM
D.# OF SHARES
A.RESERVES:
Issue No.1: Constant vs. Escalating.
a) I don't think that the starting price of US$ 8.07 for crude oil in both cases reflects the reality of the new economics after the integration. The company is now selling refined products, not crude, and gasoline, diesel etc. sell for much more.
b) The escalating approach aims to correct for inflation. Certainly, expenses will be effected by inflation, so it is only fair to index for inflation on both sides. The annual compound rate of inflation used in McDaniel's report is 1.68% for the oil prices. We are now in a period of extremely low inflation, but it is still higher than the one used here.
c) The escalating approach also corrects for the current hefty discount in oil prices from that region. As the transportation logistics and familiarity with the chemical aspects of the local crude improve, the discount will diminish.
That is why I prefer the escalating method.
Issue No.2: Discount Rate.
The evaluation period is 20 years, the current debt at 16% interest will be paid off in 2 years. Then we are theoretically debt free. I used 16% discounting trying to match the current debt rate, after paying it off there will still be 18 years to provide a 16% return on equity.
Issue No.3: Tax calculation.
We are using the same percentages, 30%,15% and 4.25%, but I think that the correct method of using them is different from yours. I applied 30%, and used the next rate on the remaining 70%,... and so on. This avoids paying taxes on taxes.
B.UPSTREAM:
Issue No.4: Fixed Assets.
In my calculation, I traded them for the refinery obligations. But the additional US$ 100 million do belong here and should be added.
Issue No.5: Debt.
I used US$ 138 million, it was now lowered to 130 million.
Issue No.6: Future Interest Payments.
I missed that, there will be about US$ 21 million payments.
Issue No.7: Capex Obligations.
I used US$ 90 million overhead deduction. You cannot count the Gas Utilization Project in addition, because it is eligible as an investment under the overall 90 million. You are doublecounting.
The restructuring fee is paid for.
The Cash consideration to minority ShNOS shareholders is only US$ 6 million (See my previous post).
Moreover, I think that buying the refinery may count as an investment against Hurricane's obligations.
C.DOWNSTREAM:
Issue No.8: Refinery Value.
We agree on US$ 300 million.
Issue No.9: Capex Obligations.
As I said , I traded them for the fixed assets in Hurricane. However, I would argue that any investment in the refinery will be made to steer production to higher-return products like jet fuel, gasoline or diesel and will therefore enhance the value of the refinery.
D.# OF SHARES:
The current number of shares issued and paid for is roughly 76 million. If you start adding extra shares in the denominator, you will have to add the proceeds from their sale to the numerator.
Forecaster
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