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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: jbe who wrote (16929)3/27/1998 11:12:00 PM
From: Chuzzlewit  Read Replies (1) of 95453
 
jbe, multiyear cash flow projections can be done like this: take the existing fleet and divide the earnings from operations (before G & A expenses, interest and taxes)plus depreciation by the number of rigs in the fleet. Get some industry info about the expected growth of the day-rates over the next few years. If any additional rigs are expected to come on line, add those rigs to the fleet in the appropriate years. Now on a matrix you should be able to generate the cash flow from operations by year. From that number you need to subtract G&A, interest expenses and debt repayment. This will be roughly equal to the free cash flow per year.

The capital recovery rate works on a rig by rig basis, and is not suitable for this kind of calculation. What I'm talking about is free cash flow from all rigs.

Yes, it is complicated, and I'm not sure its worth all the work.

Regards,

Paul
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