Financial estimation of capital investment in the oil company. Polar Lights Company - general review.
Financial estimation of capital investment in the oil company
Company future plan
The company plans the well drilling program on satellite reserves during 2006 - 2010.
Price of Brent - $ 30 for barrel
Price at sale near abroad - $18 for barrel
Domestic price - 3500 rbl for ton.
Export - 35 %
Near abroad - 8 %
Domestic market - 57 %
Pipeline tariffs ($/bbl):
Export 3,5 $/bbl – 4,5 $/bbl
Near abroad 2,5 $/bbl – 3,3 $/bbl
Domestic market 0,6 $/bbl – 0,8 $/bbl
Production expenses ($ 27MM - $42 MM) include:
maintenance of production and injection wells;
energy expenses for liquid recovery;
gathering and preparation of oil;
water disposal expenses;
The basic tax payments:
export duty - an ascending scale (the principle of calculation is considered below);
oil production tax - according to the current legislation with privilege coefficient 0,7 (the principle of calculation is considered below);
profit tax - the rate is 24 %;
property tax - rate is 2,2 % from balance cost of fixed assets;
payments to social funds of Nenetsk Okrug - according to the contract with Okrug administration ($ 500 M a year).
Mid-annual percent of depreciation of all fixed assets is 6 %. Company uses linear way of depreciation.
Rate bbl / ton 7,44
Exchange rate RUR/USD 28 – 33
Interest rate 6,59%
Discount rate 10%
1 case: export – 100%
At increase of export price above 25 dollars for barrel oil companies pay 90 % to the state as taxes, including:
2 case: export – 35%, domestic – 65% (constant price)
At increase of export price above 25 dollars for barrel oil companies pay 127% to the state as taxes, including:
Conclusion: to compensate losses from taxes oil companies have to increase domestic oil price and, as a consequence, gasoline prices.