I am not sure whether others had this problem but when I first took a look at the updated NSAI estimates presented in the Kris prospectus it didn't add up. It didn't add up as both the resource AND intervals were either downgraded or reported within different aged-rocks, and hence I couldn't marry the figures with NEN's best/high statements. There are explanations for this, however its worth a look back in time to understand why NEN insists on reporting: "3.9 TCF gas (best estimate) and 13.9 TCF gas (high estimate)". This is straight from the 2011 report from NSAI:
As you can see from the circled intervals, the addition gives us 3.9-13.9TCF, something that is impossible to achieve using the Kris numbers. On a more general note, the map also provides for a visualisation of the high case extent which is obviously the 97Km2 volume that Stapleman has mentioned. NSAI are obviously less certain about the high-case extent and it is why they have reported it in the high case scenario.
The actual reason why I am pointing this is out is to try and better explain why/how resources figures may exceed the best case. The key to understanding this is whether the amplitudes extend laterally - they probably don't or are weaker. NSAI are independent and are therefore more objective. NEN own the asset so are likely to be more subjective. Amplitudes from the lead 4 (Cua Lo) are shown below. Again does not show the lateral or projection southwards, just a cross section at depth as indicated by blue lines:
I've also asked the question as to whether we cannot see amplitudes that connect the best to high case volumes. Similarly its worth asking yourself whether we cant see the amplitudes as this is 2D seismic. The black map shows the far minus near times far AVOs - strong indication through the objectives at the well location.
In 2013 NEN released 'some' commercial in confidence 3D seismic. We will never be able to answer my previous question as the 3D was only shot over the following area, not the high-case extent. Why? the 3D was designed to delineate the Cua Lo drill position to intersect where 2D plus 3D amplitudes were strongest:
While the latest drilling update indicated a new '5th' zone, NEN actually identified this zone much earlier - testament to their subjectivity and expertise. This was highlighted in the Sept 2013 quarterly (example only):
What I found interesting about the 3D findings was NEN's thinking around why/how we might realise the high case volumes. They first point out the 'new' zones (some of them as indicated in May presentation) but also suggest how the resource might laterally extend - as follows, reading my notations:
Management have never spruiked the prospects, but these subtleties indicate that even they believe that the resource will be larger than 'best'. They have obviously applied their subjective expertise. As I've said before, I have dibs on 6TCF with upside risk to this.
NEN Price at posting:
43.0¢ Sentiment: Buy Disclosure: Held
