Ann: Nido Secures Dragon Oil as Farmin Partner to, page-22

re: Ann: Nido Secures Dragon Oil as Farmin Pa... Niu,

I had exactly the same initial reaction when first reading the WI retention deal with Dragon...somewhat relieved to read further on picking up another 10% from PNOC.

PNOC-EC have always been trying to farm out a portion of their WI in SC63. This document is undated, and I've been aware of it for some years.
PNOC - SC 63 EXPLORATION ACREAGE FARM-IN OPPORTUNITY

Still, nothing is firm until it has been signed, and in this regard, as you indicate, the market is left wondering what the final deal will be rather than "this is the full deal folks"!

Given the time frame for the equity decision in the Baronang PSC, it is fairly evident that NDO wanted a quick deal to free up cash for a possible increase in equity. What other reason would there be to announce a "half baked" farmin arrangement for SC63?

Actually, just listening to BRR, I think there is no doubt Phil will increase the WI in Indo...right at the end of the interview you can hear him say (in relation to the Indo question) "and when we exercise this option, err, I'll update the market about that time.."

Looks like the tow weather for the Indo drill will make an ass of the half an SC63 deal.

Just doing a few figures after listening to BRR, if we take the well cost at US$25M, NDO with a 20% WI (assuming) will have to contribute 8% of the well cost (US$2M), and will be free carried on 12% (US$3M).

So, of NDO's original budget of US$12M to drill Baragatan at 50% WI, we now have US$10M freed up for Indo increase.

Let's look at exploration oil cost under the farmin arrangement...we'll use the Baragatan BEST case prospective resource of 151mmbbls.

On a 50% basis NDO would receive 75.5mmbbls for a drilling cost of US$12M. This results in an exploration cost per bbl of $0.1589/bbl (15.89c/bbl).

On a 20% basis with a 12% carry, NDO gets 30.2mmbbls for US$2M. This results in an exploration cost per bbl of $0.0662/bbl (6.62c/bbl)...58% cheaper/bbl.

Development costs are something else again, and will only need to be discussed on a success case basis, although 20% contribution carries way less risk.

Very disappointing we don't get the top 20 list each Q like they do in OEL...we might get an insight into how long we may have to endure this seller. Guess we'll just have to wait for the annual report in March to compare it with March 2013.

IMO only of course, and all comments welcome.