Thought you had gone mad for a moment there Auto and pushed the wrong buttons on NPV calculator or something similar.
Elsewhere posted have been suggestions of debt funding .... AKK said in the PR at time of acquisition that "Austin will remain debt free post acquisition" ... are they flip flopping or are pumpers pumping?
Also in that PR is the effective date of the transaction - 31-Dec-2016 (the closing date is Mar 6, 2017). Effective date is date from which AKK will receive the production. All customary adjustments to final settlement price made on Mar 6.
Let's say in a perfect world the average selling price for a barrel of oil AKK RECEIVES is $60 (so WTI will be in the high $60s). In this dream world the 52 bopd flows forever and 365/yr (so 18,980 per yr) and NO CASH needs to be spent on it other than production costs and only other cost is AKK G&A (say $1.898M) and of course the Royalty.
Of course that's silly due to the G&A cost per barrel and you would be right in saying it is not a production cash cost but a corporate expense. But it is paid and highlights why Net Income is negative.
OK lets take out G&A and live in lalaland. $34/Bbl = $645,320 for 2017, 2018, 2019, 2020, 2021,...
Now do say PV15 of those 5 years of cash flow (and if you think AKK WACC is better than 15% think again I say). It comes to $2.163M. That's right they've earned $163K on US$2M over 5 yrs in a perfect world.
Check those calculations - they were done quickly on back of envelope.
AKK Price at posting:
0.6¢ Sentiment: None Disclosure: Not Held
