re: Ann: Rialto completes transaction with Vi...
Thats right Boz, but my point was its not $50m of RIA's cashflows that will be given up, it will just be that RIA will not access any of the first $50m of cash returns from Gazelle. I reckon this will only be around about 5 months of full production, lets say 6-7 months to be sure.
Ok this means if the P90 is the only production undertaken, then they pretty much lose all of Gazelle, but I think its highly probably that the P50 will be achieved.
I've worked back to review the estimated gas price that we should be working off, and in order to get an IRR of 15% as stated in the recent oil barrel presentation, then the gas sales price would need to be between $5 and $5.50 depending on when Year 1 starts on the NPV.
Importantly, when you overlay this on the same basis, but take into account the P50 resources, then the IRR would rise to either 71% or 120% depending on when you take Year 1 (and therefore when we book returns.
On the first lower example (where we have the higher gas price, and lower IRR on a P50 base) I have taken half of the capital investment to be made in 2014 (year 1). In the 2nd option I have taken all $120m of the capex to be spent in 2015, hence this then becomes Year 1.
All in all, it sounds a very low risk development, and whilst disppointing that RIA will not touch the first $50m of cash returns, they will still have access to the returns certainly on a P50 basis.
We need to know how they will finance this, and also finance tie in of Hippo etc but Gazelle will provide a lot of the infrastructure (ie. pipelines to the land) so all good and hopefully less capital intensive to tie back some of the other discoveries.
Ps. I also expect Vitol to be fairly aggressive in either appraising or exploring, as we all know they didn't farm into CI-202 for Gazelle, this is just a means to an end in order to appease the CIV government.
RIA Price at posting:
3.9¢ Sentiment: Hold Disclosure: Held
