13-10-2014, 02:35 PM
(13-10-2014, 09:32 AM)propertyinvestor Wrote: [ -> ](12-10-2014, 03:42 PM)Boon Wrote: [ -> ](11-10-2014, 05:46 PM)propertyinvestor Wrote: [ -> ](10-10-2014, 10:52 PM)Boon Wrote: [ -> ]How are Linc’s assets being carried on its Balance Sheet (BS) ?
Total Reportable Segment Assets (30-June-2014) = AUD 942.971 million = BV = Book Value
Consisting:
1) Oil & Gas (Conventional) = AUD 593.680 million (Proven reserves only)
2) Coal (Conventional) = AUD 43.986 million
3) Clean Energy (UCG) = AUD 96.714 million
4) Shale Oil (Sapex) = AUD 136.907 million
5) Corporate/Unallocated = AUD 71.684 million
Based on BV,
Total Equity (net of liabilities) = AUD 267.189 million or NAV = SGD 0.50 per share = BV
Market Value (MV) of Linc’s assets are above its BV : Possible Additions ABOVE BV:
1) Oil & Gas (Conventional) = 2P (PV 10) of Alaska (Umiat) = USD 2,465 million, if reserve could be proven up from 2P to 1P
2) Coal (Conventional) = Potential Sale Price – AUD 43.986 million
3) Clean Energy = ? The Directors’ believe that the recoverable amount of goodwill exceeds the carrying value.
4) Shale Oil (Sapex) = possible billion, depending on de-risking process or validation ?
5) Corporate Assets = AUD 155 million (Carmichael Royalty) – AUD 71.684 million
Carmichael Royalty (under corporate assets) had been sold for AUD 155 million or AUD 83.316 million above BV or SGD 0.157 per share above BV.
Assuming Linc’s conventional coal assets could be sold for another AUD 155 million or AUD 111.014 million above BV or SGD 0.208 per share above BV
NAV(1+3+4) + RNAV (2+5) = SGD ( 0.50 + 0.157 + 0.208 ) = SGD 0.865 per share (pretty close to current share price)
RNAV (1+3+4) potentially could be worth a lot more - pure speculation - part & parcel of E&P sector.
If 20% of 2P (PV10) of Alaska (Umiat) asset could be proven up to 1P reserve, it translates to 0.20 x USD 2,465 million or about SGD 1.00 per share
What is RNAV(4) & RNAV (3) ? Who knows ?
(vested)
Hi Boon, I just did some research on 1P and 2P valuations. I found out the current market valuation of 1P oil assets is around USD 3 / barrel while 2P is USD 0.5 / Barrel. Are you using this rate in your valuation?
Hi "propertyinvestor",
I am not aware that such rate exist in the market that you are talking about - it needs to be asset specific as cost of production could vary greatly between assets.
If you are talking about EV/1P or EV/2P multiples, it needs to be company specific.
(vested)
I am referring to conventional oil & gas assets. Not referring to the EV but the valuation price of reserves in terms of barrel. Not taking into account the cost of production. Just the raw valuation in assessing the value of the oil and gas asset
Hi propertyinvestor,
By using the “raw” valuation rate you are proposing to value Linc’s 1P & 2P reserves (conventional O&G assets), this is what you get
Value of 1P reserve of Gulf Coast is worth = 11.6 mmboe x USD 1.00 / barrel = USD 11.6 million
Value of 2P reserve of Alaska (Umiat) is worth = 154.6 mmbbl x USD 0.50 /barrel = USD 77.3 million
Total value = USD 88.9 million
Linc managed to raised two tranches of Senior Notes of USD 265 million + USD 125 million = USD 390 million, which are secured by the Company’s oil and gas assets in the United States – non-recourse to Linc’s other assets
If the USA asset is worth only USD 88.9 million, how could it be used to secure USD 390 million worth of credit? Besides, those institutional creditors who subscribed to the notes do require comfortable degree of MOS - LTV compliance.
USD 88.9 million is way too conservative.
Putting reputation risks aside, the worst scenario that could happen to Linc’s conventional O&G asset in the USA is to assume : assets – liabilities = zero (i.e. Linc defaulted on its USD 390 million loan obligations and let the creditors seize the assets)
Under the above scenario, Linc would be left with
1) Shale Oil asset (Sapex)
2) Clean Energy asset (UCG)
3) Conventional Coal asset
4) AUD 155 million (USD 145 million) – proceed from Carmichael royalty
5) Debt of USD 200 million (convertible notes)
If Linc could divest its conventional coal assets for another AUD 155 million, it would have enough cash to redeem the USD 200 million convertible notes and be debt free.
That said, my take is Linc's conventional O&G assets in the USA is worth more than its liabilities.
(vested)