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  • lexpress56 lexpress56 Aug 13, 2007 4:47 PM Flag

    10k/a

    Peak made a presentation at a NY investment conference wherein he recited some cash flow considerations at 200 mcf a day (actually 220) would yield $120 million in annual revenue to MCF, which would arguably justify a $1 B market cap. In an earlier post, I noted....

    The presentation is on the contango website, under webcasts, April 25 NYork presentation -- the link should be http://www.investorcalendar.com/IC/CEPag... (listen around minute 16 for bcf counts and minute 22 on for cash flow implications)

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    • A lot of people don't seem to realize that revenues and cash flow are almost the same thing for Dutch because once they get the well producing, there is literally almost no further cost to get the gas out of the ground. Yes, there is a cost to drill and hook up the wells, but those are sunk costs. There is no ongoing cost to produce, or at least not a material cost. So if Dutch/Mary Rose is doing 400 mmcf/d as we have speculated here, that would be 120 mmcf/d net to Contango, and that's roughly $300 million a year in revenue net to Contango at $7 gas price. With those numbers, free cash flow would be around $210 million after taxes, roughly. This is the amount of cash Contango will get annually just from Dutch/Mary Rose by the end of 2008 when all the wells are drilled and hooked up. Then you have other wells that are already producing in the gulf that everyone seems to forget about. And there is the fayetteville shale asset 31,000 net acres, which is worth who knows what ($150-$200 million or more) and the LNG asset producing a low-risk $5-$8 million per year for 30 years or something like that, maybe 40 years. It's a guaranteed contract so doesn't matter what nat gas prices do.

      Then there are another 70 undrilled lease blocks in the gulf that are worth who knows what. Got to be worth something, though. The sum total has got to be worth a whole lot more than the current enterprise value of $650 million, even if it's really hard for people to see at the moment because there is no p/e ratio yet.

      And did I mention the venture capital division?

 
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