reserves report, page-17

Hi SL,

Yeah, what's funny is most of my questions to GG were able to be answered with refer to newly released detail Reserves Report. It was good though to get the explanations straight from the horse's mouth so to speak (not calling you a horse Guy).

1. Concern#1 was the Stifflemire PDP Reserve - which is now obvious why lower than expected - we get revenue and thus reserves after payout.

2. Concern#2 was the PUDs. Figure 5-1 shows clearly the layout of the 25 wells - with Stifflemire being #1H, the 2 PUDs being #2H & #3H (as in adjacent) and that Proven reserves were given for 1.5miles surrounding Stifflemire (so effectively 7 sq miles) - the oval looking area.

In discussion with GG, I brought up the PUD locations and the reassurance is that 1.5mi is OK for Proved Reserves and based on allowable spacing that's how the 25 was arrived at. Following that comes the pooling which accounts for the reduction in NRI.


Again the CR is really immaterial. The focus was for 1P for Debt. Self evident what the next ovals do to the Reserves (go up).


Had discussion around debt - as I postulated it is not a RBL type facility but much more an Asset Backed speciality finance facilty. Terms are highly negotiable (credit to GG as I couldn't squeeze any market sensitive info) so I' expecting a 5 year multi-tranche facility with interest rate between 9%-12% and origination & facilty fees of 2%-3%.


The gotcha (for me) was the revenue does not flow until after payout on the free carried wells (probably wasn't communicated in a crystal clear fashion - but I'm assured that it is API standard term for farmin - which I will add to my notebook of things to remember) - so we all need to adjust thinking there. Now the SPP is truly obvious what they meant.

GG also adamant that Netback is well over $60 (I was at well under $60). Stifflemire is a great result and should the other 2 replicate it then payout could be 6 mths-ish (DYO math but I say $65*140Mbo (1 yr est) = $9.1M)


Let sees what else -- Plough, you are correct Redbud is not ours per GG (haven't heard from HK yet).

Talked about Pierre.

Think that's about most of it.