Ann: Update - Consolidation/Split - AKK, page-46

Maybe (btw better check the depletion curve of Pierre wells. I don't see a whole lot of difference when you you at the EUR and the production curve over time). I would say you are looking at costs the wrong way if the focus is "$3M+" - it should be measured on the Capital Efficiency. Not year "Clearly" for Florence IMO.

Again I would stress - address the returns to shareholders and not what lenders get - my point was to illustrate that IMO, AKK is going to be paying an equity like cost for its debt (means it will be expensive).

While you may look forward to the "Funding Announcement and drill campaign" I will look for AKK to deliver earnings above their cost of capital to its shareholders. I'll explain that as it seems to have escaped many by way of example

You have capital of $100 to invest. You require a return on your capital of 10% or you wont invest.

You choose a bond that matures in 1 year that pays 10% and you pay $100 to buy it. What are the earnings and what was the return on capital? So far its easy right. Earnings of $10 and Return on Capital of 10%. But you haven't earned above the cost of capital

You now choose a bond that matures in 2 year that pays 10% annual coupon and you pay $100 to buy it. What are the earnings and what was the return on capital? Still easy right. Earnings of $10 each year and Return on Capital of 10% each year. But you haven't earned above the cost of capital

You now choose a bond that matures in 2 year that pays 10% cumulative on maturity and you pay $100 to buy it. What are the earnings and what was the return on capital? Still easy right. Earnings of $21 ($10 Y1 + $10 Y2 + $1 Y2 for interest on Y1 earnings) at term and Return on Capital of 10% over the term. But you haven't earned above the cost of capital.

(So much for bond investing at face value as its all about YTM anyway).

Of course a company is primarily built upon the equity contributed by its shareholders. I'm talking now about the balance sheet and the numbers reflect as Equity (and retaining earnings/accumulated losses) and Total Assets and Total Liabilities.

It will take a lot more time and space than I have to give to explain what estimate to use for AKK's cost of equity, what adjustments would be made to their Assets, what WACC a lender would use internally to evaluate the Project (because they are really only interested in the cash flow generated from the asset to make sure they are repaid) and how all of this comes together to create residual earnings (i.e. the earnings generated about the company's cost of capital). That is the fundamental reason a business exists - to earn an excess return above what the shareholder could have gotten elsewhere at the equivalent risk!!!!!

Thus far there are not even earnings let alone residual earnings. Cannot argue with that.

We shall see, evaluate and continue review.