Faris ..... >>Reading this board is truly amusing. I love it when I see someone claim that AIPN has no money and no reserves. <<<
Don't need to believe me ---- read their 10K ---- it's there for the public to see.
Also don't forget those of us that you wish not to believe have worked in this industry for years and do know at least " a littlle" about what we are suggesting. Let's see Qdog says 17 years; I'll add in my 23 years; how about any body else aout there with a little experience???
>>Now, lets talk about those reserves for a second..... Well. I did some number crunching today and I must say that I disagree with those skeptics using their own worst-case scenario as my model. .....
Let's assume that AIPN and it's as yet unannounced partner only find 10% of those 1.1 billion barrels. That comes to 110 million barrels worth let's say $17/barrel. I've been told that AIPN's cut of that will hopefully be somewhere in the neighborhood $2.50 and $3.00/barrel. With 37 million shares outstanding that would give AIPN an asset value of $7.43 and $8.91/share!!!....and that's the worse case scenario<<<<
Good math Faris, but not realistic assumptions.
Your case is nowhere near a "worst case" scenario. If you have familiarity with AKSEF story you will understand the following math.
Now this I suggest is not a "truly bad" worst case scenario but is probably a resonably good set of assumptions to build a "real world" case from.
Try it yourself and change what ever variables you like. Or look at my suggestions
First --- you forget that AIPN or someone else has to pay to drill and develop. Thus they must find partner as you agree, thus their ownership position will likely drop substantially and they will likely require other financing for upfront costs.
Thus assume their 70% share of 10% (ie of 1.1 billion barrels) after "partnering" is likely to be 15% at best (see AKSEF story) and shares will be diluted drastically by more convertible bond sales (see AKSEF story). Then they and the partners would get to split perhaps as much as half of their "reserves" and "future cash flow from production" with the govt for concession royalties. I'm sure actual % to govt is available somewhere. $3 is reasonable value as a NPV per barrel that is likely 5 - 10 years away from ever being turned into cash. Where does that leave the math.....
15% * 110,000,000 = 16,500,000 barrels x $3 per barrel = $49, 500,000. Give govt half for royalties = $24,750,000; then assume shares diluted to 70,000,0000 = $.35 per share.
Gee --- then they are back to where they were before the press releases started coming out of nowhere.
So what variables are critical here ---
(1) Likelihood of ever finding 1.1 billion barrels or even 10% of 1.1 billion barrels ---- if 1.1 billion found my simplistic math then gives you $3.50 per share.
(2) What is their final WI% after partnering???--- if they retain double 15% i.e. 30% then my simplistic math gives $.70 per share.
(3) If they find 1.1 billion barrels and retain 30% then they get $7 per share i.e. 1,100,000,000 x .30 x $3 x 50% royalty divided by 70,000,000. So is $7 the ultimate maximum upside for this stock????
(4) on top of (3) assume they only pay 25% royalty then $10.60 per share ---- is $10.60 the maximum upside??
(5) Now this is the "when hell feezes over " case . On top of (4) assume the don't dilute their shares any more <vbg>; then is $21.20 the maximum upside for this stock???
My opinion is that the base case and case (2) are more likely outcomes than either (1), (3) (4) or (5). you can pick some other combinations if you like but you will have to make some pretty unlikely assumprions to get even $2 per share to work out. One of this company's biggest problems is that they can't borrow money --- must lose ownership thru partnering or share dilution.
Maybe the July 28 fund managers would like to try a few of these cases too. I hope no fund manager invests any of my money in this story. |
