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Gold/Mining/Energy : Petrokazakhstan Inc. -- Ignore unavailable to you. Want to Upgrade?

To: FoxyLoxy who wrote (904)	3/7/2000 2:03:00 PM
From: forecaster	Read Replies (2) \| Respond to of 2357

FoxyLoxy, I appreciate your cautious valuation methodology. I haven't gone through the whole "Circular" yet, but I read very carefully the new valuation of reserves, done again by McDaniel & Associates as of January 1, 2000. As Hurricane indicated in their latest press release on March 3, 2000, total gross reserves of oil increased from 395.9 million barrels on January 1, 1999 to 442.5 on January 1, 2000 (+11.8%) and total net reserves increased from 359.3 to 416.2 (+15.8%). This means that reserves were more than replaced, despite a production of 23 million barrels in 1999. However, for valuation purposes only, McDaniel reduced the PROBABLE reserves by 50% to account for greater risk. This is not quite apparent from a casual reading of the report, but it is explained in the Note No. 7. The 20 year valuation period was rolled over to cover 2000-2019. To adhere to bare facts, McDaniel used the price of US$ 8.07/barrel received for oil by Hurricane as of December 31, 1999 (not including the extra US$ 2.15 paid by ShNOS into the Creditor Reserve Fund due to Hurricane upon merger closure) as a base in 2000 and built the estimation on an escalating price basis on this lower amount. Again, quite a conservative move. They estimated the present worth value at US$ 1.369 billion discounted @15% and US$ 1.086 billion discounted @20%. To account for the current cost of capital, I approximated the 16% discounting by pro-rating between these two values, yielding the present worth value of US$ 1.312 billion. There are no separate figures for the oil and gas components, so to eliminate the relatively insignificant gas I rounded the figure down to US$ 1.3 billion. After further discounting for profits tax (30%), excess profits tax (15%) and repatriation tax (4.25%), I get US$ 740 million. Subtract US$ 138 million debt on March 31, 2000 and the worth of the Hurricane side is US$ 602 million. Assuming that buying of the refinery was a fair deal, I valuate the refinery at US$ 300 million. The book value will be certainly lower, but this is irrelevant. Adding reserves and refinery together generates roughly US$ 900 million. Subtract a petty sum for future overhead expenses, say another 90 million and you get a final figure of US$ 810 million. Divide by 81 million post merger shares and you still get US$ 10/share. Forecaster P.S. Mr. Hickman: not creamed, well-oiled! (Cooliemon 886)