E&P CORPORATE ECONOMIC MODEL
LAUNCHED BY AMMONITE CAPITAL PARTNERS, LP
Ammonite Capital Partners, LP is pleased to announce the
development of a robust proprietary desktop economic modeling software program
that models a multi-year exploration and
development program on a fully risk-adjusted basis, and is able to output
pro-forma annual corporate income statements and balance sheets. The model is
able to show projected capital requirements and revenues by month, quarter and
year, and key economic performance indicators. Developed by Senior
Consultant John Powell, the program is based on Microsoft EXCEL, and is an
excellent tool for corporate strategic planning and capital formation.
The economic model starts with a client company’s
corporate income and balance sheet data; then inputs a multi-year
forward-looking business plan and budget, inclusive of corporate overhead
expense, G&G, leasing, and exploratory and developmental drilling costs; inputs
expected drilling results on a fully risked basis; and then generates pro-forma
financial projections. Input data is on a prospect-by-prospect and
well-by-well basis, and includes expected operational timing, chance of leases
being acquired on a specific prospect, drilling and operating costs, chance of
geological success – and hence chance that a prospect will be developed,
reserves on a probabilistic basis and production profile, lease burdens and any
promote, tax assumptions, and forecast pricing. Groups of wells are
consolidated into business units, and those business units are merged into a
corporate overview. The advantage of the Ammonite program is that it calculates
the risked results of a broad portfolio of prospects, each with a different
risk profile and cost structure. Sensitivity analyses are easy to run.
The model generates a balance sheet and cash flows, and
indicates future reserves, and evaluation metrics such as finding costs, an
NPV, and IRR data for each risked case (P10-P50-Pmean-P90). A hypothetical exit
strategy (sale of assets-merger-IPO) is arbitrarily set at a future date (i.e.- year 5) to "stop the clock" for purposes of
determining a present worth on a discounted basis (NPV).
Company management will find the model extremely useful
in terms of indicating on a risked basis what corporate cash flow will look
like over a multi-year time frame, and what capital will be required to execute
the company’s business plan. Financing through the issuance
of new equity or debt, or an acquisition, can be incorporated into the model.
Glenn Gradeen, President and COO of Rosetta Exploration
Inc.,
Ammonite Capital Partners, LP will make the software
available to its clients, but does not plan to sell the software. It is a
competitive advantage that comes with the engagement of ACP as a financial
advisor.
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