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

To: forecaster who wrote (992)	4/10/2000 3:10:00 PM
From: a_player_2001	Respond to of 2357

In response to Hickory's economic asumptions; Constant price basis is prudent being about $20 a barrel, although prices are at $25 currently 20% discount rate should reflect not only political risk but also the ability of the company to turn oil into cash - a number of (like Lukoil) have low share prices (i.e. high discount price) becuase of low ability to turn oil into cash. We should also remember that the discount rate represents the IRR on the share investment (i.e that the market expects a 20% return per annum in this case) which itself is pretty good. Excess Profits tax may be appropriate but then the company should not be paying any cash tax (i.e. 30%) due to high loss carry forwards on the ceiling test writedown. If for some reason the ceiling is revised upward than the deprecation charges should go up appropriately to shield earnings capex assumptions and commitments - 115m refinery, 90.5m south Kumbol plus exploratory concession. Presumably the company will get something in return (i.e. a higher net asset base than 517m) by turning probable into proven reserves, otherwise they won't spend the money - perhaps they will pay just the 15% penalty on the difference (also in the sales doc). I'm not a big fan of the net asset approach as everyone just argues about discount rates and the like. Cashflow is what pays debt and on that basis: In USD 77k barrels per day at 90 days =6.9m $11 netback (at $22 per barrel more at $25) - April 1 at market rate, so net back may be $13. so EBITDA $76m times 4 simply $300m per annum On an EBITDA basis 3 times (usually 4x) $900m less debt ($160m plus interest and waiver fee) or $740mat 75 million shares = $10 USD. or on an operating cashflow before debt basis 5x multiple maintenance capex $60m per annumWorking capital flat USD 240m times five less debt or $1,040mat 75 million shares = $14.5 The company will not pay any cash tax (due to above) which means opcashflow will pay back the debt within two quarters - that in my mind is what unlocks the equity value in the not too distant future. regards, player.