Linc Energy

[psolhawk]

Hi Boon,

I was attempting to calculate the PV of the Carmichael royalty. However I arrived at a different value for the PV of the sum of 20 years of royalties. Could you look at my calculations and point out where the differences in our assumptions lie?

Currently taking Introduction to Finance from coursera.org so pardon my rudimentary knowledge. Trying to apply my new-found knowledge.

Thanks!

[Behappyalways]

by the time the royalties starts to flow into the company in 2017, the number of shares in the company by then is most likely to be much higher than present.....so trying to find PV might be a waste of time.....

[Boon]

Hi Boon,

I was attempting to calculate the PV of the Carmichael royalty. However I arrived at a different value for the PV of the sum of 20 years of royalties. Could you look at my calculations and point out where the differences in our assumptions lie?

Currently taking Introduction to Finance from coursera.org so pardon my rudimentary knowledge. Trying to apply my new-found knowledge.

Thanks!

Hi psolhawk,

Excellent work – your spread sheet look fine except one input data – number of shares should be 587,820,177 and not 571 million.

If you amend the number of shares and change the discount rate to 7.5% - you will get almost the same number as mine.

I have computed quite a number of scenarios with different input data including using different discount rates.

In another word, I made a mistake in my write-up – I had mistakenly quoted the 7.5% discount rate output to be that of 10.0% discount rate – must be looking at the wrong cell – ha-ha !.

Please double check again to see if you could get the following outputs:

PV (7.5% discount rate) = SGD 2.06 per share
PV (10.0% discount rate) = SGD 1.55 per share
PV (15.0% discount rate) = SGD 0.92 per share

In short, MOS is less than what I originally thought.

Thanks for pointing out the mistake – good work.

(vested)

[Boon]

by the time the royalties starts to flow into the company in 2017, the number of shares in the company by then is most likely to be much higher than present.....so trying to find PV might be a waste of time.....

True, by the time the royalties starts to flow into the company...., the number of shares in the company by then would most likely to have increased .........but the increase in valuation then (with lower discount rate to reflect the decrease in risks) would more than make up for the effect of share dilution.................so trying to find PV might NOT be a waste of time to SOME.....

(vested)

[Boon]

Adani's multi-billion dollar rail project awaiting final nod

Monday, 7 July 2014 - 2:41pm IST | Place: Mumbai | Agency: PTI

The proposed AUD 16.5 billion mine and rail project of Indian mining major Adani Mining Pvt Ltd in Queensland is awaiting the final nod from federal environment minister Greg Hunt and is expected to be taken by August 1st this year.

The proposed AUD 16.5 billion mine and rail project of Indian mining major Adani Mining Pty Ltd in Queensland is awaiting the final nod from federal environment minister Greg Hunt and is expected to be taken by August 1st this year.

The Carmichael mega-mine?project, which was subject to 190 conditions at the time when Adani launched the proposal, was approved by the Queensland's co-ordinator general two months ago paving the way for Adani to develop one of the biggest coal mines (in the Galilee Basin) in the world.

The project includes a 300 kms rail line connecting Adani's planned Carmichael Coal Mine, Northwest of clermont, to the Abbot Point Coal port, near the Great Barrier Reef.

Adani in a statement here said: "After receiving the Queensland Coordinator General?s approval on May 8th, Adani's Carmichael Coal Mine was deemed a prescribed project by the Queensland Minister for State Development and Deputy Premier Jeff Seeney, another step towards the project's timely commencement."

Stating that approval from the Environment minister was expected by first of next month, the statement said "Adani has sought that the Commonwealth approval process for the North Galilee Basin Rail project currently a parallel process be aligned with the anticipated Queensland Coordinator General?s approval for the project.

"Decisions on these approvals had always been envisaged on or around Q1 2014-15FY.

"These timelines, coupled with the extant Abbot Point approvals process, position the company well to ensure it meets its longstanding first coal guidance for 2017," it said.

"Approvals granted for Adani?s infrastructure investments in Queensland have, to date, been amongst the strictest and most stringent processes of their kind ever undertaken by any level of government in Australia.

"Adani looks forward to continuing to work with our project partners and all levels of government in Australia, it said.

http://www.dnaindia.com/money/report-ada...od-2000262

[Boon]

This is a very good article.

(vested)
________________________________________________________________________________________________________________
Oil and Gas Company Valuations
Alex W. Howard, CFA, ASA, and Alan B. Harp, Jr., CFA, ASA
This article provides a primer on the analysis and valuation of exploration and production companies and related reserve engineering reports.

http://www.srr.com/assets/pdf/oil-and-ga...review.pdf

[Boon]

According to the following interesting report
http://sptec-advisory.com/The%20value%20...0firms.pdf

The sample O&P companies under studied were traded at the following discounts to their PV-10:
8.8 % discount (median) to PV-10-1P and
57.2% discount (median) to PV-10-2P

According to the following presentation
http://lincenergy.listedcompany.com/news...9Q3D.1.pdf

Linc’s Gulf Coast (USA) Conventional Oil & Gas asset has 1P Reserves of 11.6 mmboe with PV-10-1P = USD 489 million

Assume USD/SGD = 1.23 and apply 8.8% discount (median) to PV-10-1P of Gulf Coast asset.

PV = SGD (1.0-0.088) x 1.23 x 489 million = SGD 535.2 million = SGD 0.93 per share

(note: Number of share = 587,820,177)

(vested)

[Boon]

Another good article : Reserves Matter(s)

Understanding the Petroleum Resources Classification Framework

By Deloitte , May 2013

Good diagrams on page 8 :
“PIIP” = “petroleum initially in place”
Discovered PIIP
Undiscovered PIIP
Commercial PIIP
Sub-commercial PIIP
“Contingent Resources” => 1C, 2C, 3C
“Proved Reserves” = 1P
“Probable Reserves” = 2P
“Possible Reserves” = 3P

http://www.iasplus.com/en-us/publication...sue-1/file

(vested)

[Boon]

India’s coal shortage a boon for Australian miners

15 July, 2014 Vicky Validakis

In what could be good news for Australia’s coal industry, India’s power plants are running out of stock, forcing the country to increase its import levels.

India already imports 20 per cent of its coal requirements and shipped in 152 million tonnes of coal last year.

However rising electricity demands are putting an increasing strain on local production, with state-run Coal India Limited (CIL) asked to up its output by importing more of the commodity to mix with domestic supply.

A source told The Economic Times that India’s power plants were not running at optimum levels, with more coal required to help in a ramp-up.

There are currently 65,000 MW of power generation projects out of action.

Although pooling will raise the cost of coal, it is seen as a way to help underperforming plants generate more electricity.

The demand for coal in India is expected to come in at 551.60 million mt in 2015, however supplies are predicted to amount to just 466.89 million mt, leaving an 84.71 million mt shortfall.

From 2010 to 2040, India’s net coal-fired electricity generation is expected to grow by a total of 910 terawatt hours, more than doubling from the 2010 total, while coal consumption for electricity generation will double.

Professor John Rolfe from CQUniversity said India would look to Australia for a reliable supply of high quality coal products.

Rolfe said this was particularly good news for coal miners in Queensland where a host of new multi-billion dollar mines were awaiting development approval in the Galilee Basin..........................

http://www.miningaustralia.com.au/news/i...ian-miners

(vested)

[Boon]

Presentation material on:
“Global Economic Trend and the Market Outlook for the Shipping Industry”

By Dr. Stavros Tsolakis
The MPA Professor in Maritime Economics and Shipping Finance,
Singapore Management University

10-April-2014

http://moorestephens.com.sg/docs/SSC2014...dustry.pdf

I have posted this presentation material on the “Shipping News” thread.

This presentation material also contain projections of coal consumption and demand especially from India which are relevant to this thread.
- By 2024, India will be the second largest consumer of coal after China
- Coal imports are expected to increase by 53.4%

(vested)