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

To: forecaster who wrote (906)	3/7/2000 6:05:00 PM
From: FoxyLoxy	Read Replies (2) \| Respond to of 2357

forecaster I believe there are couple of "holes" in your logic, at least from my perspective. I took a similar approach. 1. You have assumed a cost of capital of 16%, but that is the cost of debt, and does not include the cost for "equity". The "discounted values" on an engineering report are supposed to represent the "cost of capital", both debt and equity. I believe you need to revise the discount rate to reflect the cost of "equity", say 35% (or whatever you believe is appropriate - for you). Equity does have a cost - you expect a return, right. You cannot expect a return of capital, and assume a 0% cost of equity..... 2. I believe that, as a result of 1. above, you have assumed that "fresh capital required" has an expected return of 16% - again not realistic. 3. Debt payments you have deducted are not fully reflective of the payments to be required. 4. I am assuming that the increase in reserves is due to the change in the price of WTI - last year was at a low. Engineers do consider whether barrels are economic to produce. The will cease production when the costs exceed the revenue - not economic. As you can appreciate, with higher commodity prices, there will be more barrels at the tail end that are"economic", thus the increase... 5. I utilized a similar approach, however, I assumed that the debt was to be retired, deducted the full payments from the "value", but estimated a 35% discount rate to reflect the cost of equity. I also squared this off by declining the produced barrels and applying the "revised" economics, as found in the court documents. 6. I assumed that the denominator would change from 80 million..... Hope this clarifies my work for you, and somewhat reconciles our similar approaches. All respectfully submitted. FoxyLoxy

To: forecaster who wrote (906)	3/7/2000 9:30:00 PM
From: Bread Upon The Water	Read Replies (2) \| Respond to of 2357

Well Forecaster, I truly hope you get yours--you've done enough Math to have earned it. While you are waiting on Hurricane why not join me in buying some SPDR energy services (XLE) shares on the AMEX and hold on to them for one week for a quick 20% profit. Then you can come back and pick up some more Hurricane--probably at a lower price (It worries me that HHL.A went down today when the energy market was going crazy--this is not a good sign---probably people are pulling their money out for more generic energy plays like SPDR's.) Anyone else for speculating? Player? Razor? Hickory? Foxy--I know its not in your nature, but you could take some of the Hurricane profit and roll it. Bill (still standing)