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

To: Hickory who wrote (987)	4/9/2000 6:38:00 PM
From: a_player_2001	Read Replies (2) \| Respond to of 2357

Hickory, I am have not had a chance to study the figure's yet but seperately I am wondering who these: "militant muslim fundamentalists who are using violent terrorist acts to try to force the K government to expunge the baleful influence of the Great Satan of the West from Kazakhstan" are? I follow the country closely, and as far as I know these types of movements are contained within Afghanistan, and only ever spill over into vulnerable neighbouring countries (which Kazakhstan is not) such as Tadjikistan, which have a high % of muslim population (again, which Kazakhstan does not). The Russians, who still consider this region their sphere of influence, continue to maintain strong "supportive" presence in those countries (like Tadjikistan)that touch Iran/Afghanistan in order to prevent the spread of just such Islamic fundamentalism. I agree their are risks over there but feel you are overstating them. Kazakhstan, is by far the most western of the "stans" and the people there are generally embracing the new westernised economy. also, how do you come up with your npv of oil reserves, when proven reserves exceed 400m barrels? are you trying talk this stock down for some reason? respectfully, player.

To: Hickory who wrote (987)	4/10/2000 1:06:00 PM
From: forecaster	Read Replies (1) \| Respond to of 2357

Hickory, I am not an expert on politics, so I'll stay with the economics. You are a systems analyst and you will certainly appreciate a systematic approach. I suggest that we break the beast into four segments: A.RESERVES B.UPSTREAM C.DOWNSTREAM D.# OF SHARES A.RESERVES: Issue No.1: Constant vs. Escalating. a) I don't think that the starting price of US$ 8.07 for crude oil in both cases reflects the reality of the new economics after the integration. The company is now selling refined products, not crude, and gasoline, diesel etc. sell for much more. b) The escalating approach aims to correct for inflation. Certainly, expenses will be effected by inflation, so it is only fair to index for inflation on both sides. The annual compound rate of inflation used in McDaniel's report is 1.68% for the oil prices. We are now in a period of extremely low inflation, but it is still higher than the one used here. c) The escalating approach also corrects for the current hefty discount in oil prices from that region. As the transportation logistics and familiarity with the chemical aspects of the local crude improve, the discount will diminish. That is why I prefer the escalating method. Issue No.2: Discount Rate. The evaluation period is 20 years, the current debt at 16% interest will be paid off in 2 years. Then we are theoretically debt free. I used 16% discounting trying to match the current debt rate, after paying it off there will still be 18 years to provide a 16% return on equity. Issue No.3: Tax calculation. We are using the same percentages, 30%,15% and 4.25%, but I think that the correct method of using them is different from yours. I applied 30%, and used the next rate on the remaining 70%,... and so on. This avoids paying taxes on taxes. B.UPSTREAM: Issue No.4: Fixed Assets. In my calculation, I traded them for the refinery obligations. But the additional US$ 100 million do belong here and should be added. Issue No.5: Debt. I used US$ 138 million, it was now lowered to 130 million. Issue No.6: Future Interest Payments. I missed that, there will be about US$ 21 million payments. Issue No.7: Capex Obligations. I used US$ 90 million overhead deduction. You cannot count the Gas Utilization Project in addition, because it is eligible as an investment under the overall 90 million. You are doublecounting. The restructuring fee is paid for. The Cash consideration to minority ShNOS shareholders is only US$ 6 million (See my previous post). Moreover, I think that buying the refinery may count as an investment against Hurricane's obligations. C.DOWNSTREAM: Issue No.8: Refinery Value. We agree on US$ 300 million. Issue No.9: Capex Obligations. As I said , I traded them for the fixed assets in Hurricane. However, I would argue that any investment in the refinery will be made to steer production to higher-return products like jet fuel, gasoline or diesel and will therefore enhance the value of the refinery. D.# OF SHARES: The current number of shares issued and paid for is roughly 76 million. If you start adding extra shares in the denominator, you will have to add the proceeds from their sale to the numerator. Forecaster

To: Hickory who wrote (987)	4/12/2000 5:10:00 PM
From: dumbo	Respond to of 2357

Re net asset valuation: Your methodology has a couple of errors. First, if you deduct the required capital spending from the asset value, you are assuming that the capital spending generates no value. Remember that when the engineers do an asset valuation, they deduct the capital spending required to get the reserves in their calculation. When you deduct the capital requirement, you are in fact deducting the necessary capital spending twice. It is likely that HHL is required to spend more than the engineers have found to be necessary to bring on the production forecast in their report. If that additional capital is spent productively, say to capture natural gas and liquids currently being flared or to improve refinery yields, then the resulting asset offsets the cost. Don't deduct the capital in your calculation. While it is correct to deduct existing debt, it is not correct to deduct the interest on that debt. Remember that you discounted the asset at 20%. Correctly, you would deduct the market value of the debt. If you wanted to look at the cost of debt plus interest over one and a half years, you should look at the value of the asset one and a half years out as well. The asset value will not be constant because it has been discounted at 20% so the asset value of the oil in the ground grows by 20% P.A. less the reserves produced, plus the cash generated, less the capital spent to get the reserves. The accepted route is to deduct either the market or book value of the debt. Finally, I wouldn't deduct the excess profits tax as it is doubtful that the price assumptions used in the asset value calculation would lead to excess profits. If there are excess profits, I suspect they are out far enough in time that the present value of them is small. I would hope however that the excess profits tax is huge because it implies great return on capital!