Scancell Holdings - Re: SCLP Stream Log - 8trader 15:59 I just gave...

8trader 15:59 I just gave SER a BUY rating: Conclusion and Valuationr We recently introduced 2014 forecasts and feel these are still valid as the additional revenue generation from the improvement works in California is delivered to the top line. As economies of scale return following the large investment that has taken place, we expect to see an improvement in margins. Further, our forecasts do not include any revenues that would be generated by the activation of the gas pipeline in Kansas, and we look forward to including this in due course.r r We have updated our Net Present Value (NPV) model of the company’s California oil assets to start from the beginning of 2012, using all assumptions highlighted when we introduced our valuation on 14th March 2014. This includes applying a 10% discount rate over expected cash flows for a 15 year period, with oil production of 170 BOPD in 2012 that rises to 250 BOPD from 2013 onwards. The oil price remains constant at $100 per barrel. We expect lifting costs of $15 per barrel, with a production tax of 6% and royalty of 10% of the price per barrel on top of this. G&A costs increase at 3% annually from circa $1.85 million in 2012, and capital expenditure increases at 3% from £1 million. Finally, we expect interest costs of c.$240,000 in 2012 that decrease by 5% per annum.r r This gives an NPV of £12.3 million using an exchange rate of £1 = $1.55. Additionally, Sefton’s Kansas oil and gas assets have been independently valued by Dr. Nafi Onat at $140.0 million. We have discounted this by 80% to give a value of $28 million, or £18 million using the same exchange rate of £1 = $1.55. After subtracting net debt (as at 31st December 2013 using exchange rate of £1 = $1.55) of c.£2.3 million, this results in a combined valuation of £28.0 million, or a value per share of 7.0p.r r The company has had a number of news flows recently highlighting the developments that have taken place both in California and Kansas. The management has shown continued dedication to the refurbishment of the Tapia oil field, and has commissioned independent studies of the region that will be used to further increase production. The redevelopment of the company’s pipeline in Kansas made significant gains in 2014, and it should start to generate cash flows this year. In addition, it is comforting to note that both the Kansas and Californian assets have received independent valuations that provide significant potential upside to our valuation. With the shares trading at 0.2p our stance is Speculative Buy with an increased target price of 7p...