GROUP 2 PORTFOLIO
MEMBERS | STUDENT I.D Number |
1) Kemeitupamoere Eradiri | 4585381 |
2) Iranilma Dos Santos | 4693000 |
3) Paul Uchenna Gabriel | 4944924 |
4) Amma Addai-Donkor | 4774941 |
5) Tari Youkedebah | 4534895 |
6) Karen Elom Adiamah | 4761446 |
7) Seidu Babilo | 4816285 |
8) Obinna Vincent Unaegbunam | 4901536 |9) Henry Ajieh | 4517245 |
Currently, Delta Petroleum is experiencing swift decline in the in its current oil production. Therefore growth and replacements is its top priority, with a focus on the rationalization of 5 upstream assets in different countries, namely: Algeria, Canada, Kazakhstan, Mozambique and UK North Sea.
The different assets are economically analysed and aportfolio developed with an aim to ascertain the best and most profitable asset(s) affordable with the limited budget of $900M/year for five years. Assets are analysed and Portfolio drawn based on the following factors:
* VALUE (Net Cash flow, Profit-to-Investment Ratio)
* CONTINUING PRODUCTION
* PRODUCT MIX (Oil + Gas)
* DIVERSITY OF SUPPLY
* POLITICAL STABILITY
Prices(as @ 8/02/13): BRENT = $114.5/bbl, WTI = $92.08/bbl and Nat. Gas = $3.46/MMbtu
Tax rates: Algeria = 20%, UK = 30%, Canada = 15%, Kazahkstan = 20%, Mozambique = 32%
Conversion Rates: 1BOE = 5658.5Cuft and 1Cuft = 1020Btu
1) PRODUCT MIX AND VALUE:
Product mix can be defined as the total number of product lines a company offers to its customers.
* Algeria has 2 product mix (Oil and Gas).Has 3 oilfields and a net reserve of 280 million bbls. Has an API value of 34. But, the price cap of $35/bbl which is below the current market price of $92.08 makes it less desirable for our company. Also has a gas field with net reserve of 1.5Tcf with quality gas but a price cap of 2.95/mmbtu instead of the current $3.46/mmbtu is also bad for our company.
* UK North Sea has 5 mature oilassets and 3 gas fields with a net reserve of 60mmbbls and 300bcf respectively. The oil quality is light and sweet crude while the quality of gas is also good making it nice to invest.
* Western Canada has just the oil asset with a net reserve of 200mmbbls and a possibility of upgrading to synthetic crude which provides us with a high profit margin as the demand for synthetic crude is very high.* Kazakhstan has just the oil asset with a net reserve of $720mmbbls for 4 licenses, but, a sulphur content of 3% decreases the quality of the oil and hence the demand also making it a bit difficult to invest.
* Mozambique has 2 licenses with $3Tcf net reserve, but, the government is still working out a bill to determine the fiscal regime.
2) CALCULATIONS OF PROSPECT FOR CONTINUINGPRODUCTION:
3 Oil Fields (net reserve = 280Mbbl) : 1 Gas Field (net reserve = 1.5Tr Cuft)
Crude API = 340 (medium Crude)
Product cap = $35/bbl and $2.95/mmbtu ($0.003/Cuft).
Operating cost ($9 x 150,000 x 365) - $492,750,000
Transport & Tariff cost ($1.5x 150,000 x 365) - $82,125,000
INVESTMENT = $80M + ($7X 150,000 X 365) | $436,250,000 |
REVENUE = $35 X150,000 X 365 | $1,916,250,000 |
TAX (20% of Revenue) | $383,250,000 |
OPEX (Operating + Transport) | $574,875,000 |
Table 1: NET CASH FLOW FOR OIL WELL
| Figures are represented in Million USD (1000 000) |
YEAR | INVESTMENT | REVENUE | TAXES | TOTAL EXPENSES | NET CASH FLOW (NCF) | ∑ NCF |
0 | 463.25 | | | | -463.25 | -463.25 |
1 | | 1,916.25 |383.25 | 574.875 | 958.125 | 494.875 |
2 | | 1,916.25 | 383.25 | 574.875 | 958.125 | 1,453.000 |
3 | | 1,916.25 | 383.25 | 574.875 | 958.125 | 2,411.250 |
4 | | 1,916.25 | 383.25 | 574.875 | 958.125 | 3,369.250 |
5 | | 1,916.25 | 383.25 | 574.875 | 958.125 | 4,327.375 |
TOTAL | | 9,581,25 | 1,916.25 | 2,874.375 | 4,327.375 | |