Zeev: Arakis' own internal projections for its share of the total Sudan Project capex budget from 1997-1999 (prior to any export shipments via the pipeline) is US$240 MM, of which US$120 MM alone must actually be spent by the end of 1998. Arakis only has approximately US$50 MM of net working capital at the present time. Assuming they don't go off and squander any more of this money (which was very expensive to raise, if I remember correctly), then they will have to approach the financial markets for US$190 MM more capital prior to generating any initial cash flow from the Sudan Project.
The additional capital requirement equates to a grand total of US$2.18/share (about 60% of the current share price) assuming the current number of shares outstanding (87 MM) aren't diluted in the financing process. Of this total, approximately US$120 MM (US$1.38/share, or about 38% of the current share price) must for all practical purposes be placed before the end of this year.
In my humble opinion, this is a very high priority issue for the company, and there is no guarantee that this placement can be made with straight debt, given the level of sovereign risk in Sudan. If straight debt is not a possibility, then we may very well be faced with additional equity dilution.
If Arakis' financing requirements were not on the immediate horizon, then you would not hear me carping about the magnitude of the loans made to the officers, the US$1.25 MM cost of drilling the Wadi Saylah No. 1 well in Oman, or the projected US$3.5-5.0 MM/year of G&A overhead required to maintain the Calgary office. But the fact is that these financing requirements are on the immediate horizon. Therefore, I am keenly sensitive to the way in which the Company chooses to deploy its relatively limited net working capital.
Razor |
