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Gold/Mining/Energy : American International Petroleum Corp

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To: Ditchdigger who wrote (495)	7/20/1997 6:47:00 PM
From: faris bouhafa	of 11888

The question of government involvement in this deal is one that I intend to ask either prior to or at the New York meeting which I hope to attend. As for your model being applied to AIPN's 10% of 1.1 billion barrels, I am not sure it is applicable...but I say that mostly out of ignorance. For one thing how does a partner like an Exxon fit into that model? Would an Exxon take the place of Ecopetrol in this case? Or, would an Exxon have say 90% of AIPN (HEC in your model)? Let's assume the latter and do the numbers using 100 million barrels and a sales price of $17/barrel. 100 million barrels multiplied by $17 is $17 billion. The Kazakstan government takes 20% or $3.4 billion off the top leaving $13.6 billion. For the first 60 million barrels MED Shipping would receive 50% of $8.1 billion (60% of $13.6 billion) or $4.08 billion of which AIPN/Exxon's (for example) share would be 70% or $2.85 billion. AIPN would then be entitled to 10% or $285 million. On the remaining 40 million barrels let's assume that MED Shipping only gets 30%. Having already taken the government's 20% off the top, the remaining 40 million barrels would produce $6.8 billion in income. Of that MED Shipping would receive 30% or $2.04 billion. AIPN/Exxon would get 70% of that or $1.42 billion. AIPN's 10% stake would entitle it to an additional $142 million. So, as per the above and your model, it would seem that AIPN's share of 100 million barrels of proved reserves would be somewhere in the neighborhood of $427 million. With 37 million shares outstanding that would leave AIPN with an asset value of $11.54/share. To put this in some perspective, consider that, as of 1996, Triton Energy with a 9.6% interest in the Cusiana field had a a proved reserve value of $815.4 million (according to Value Line). With about 37 million shares outstanding and trading at let's say $60/share that would Give Triton a market cap of $2.22 billion or 2.72 times proved reserves value. If the above estimates are more or less on target and AIPN were to trade at 2.72 times its hoped for proved reserves value then we will eventually have a $31/share price. The variables ,of course, are numerous. The deal could be structured differently. AIPN may end up with more that 10% of Huddleston's estimate of potential reserves (given the location, I seriously doubt that they would end up with less). The remaining 40% of the License Area that has not yet been evaluated may significantly increase the number of proved reserves. Who knows? But, one thing is certain to me at least...AIPN shares will not be trading at $2 for very long and that's based on a mere 10% interest in a 70% interest in a field that only yeilds 10% of its reported potential reserves. If I have missed anything in my calculations please let me know. Cheers...Faris

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