working out the true value of BRK?, page-6

HI Resurgam


Growler 1969 pretty well summed up the situation . Here is my quick attempt to get some numbers up.

Continental Resources in their most recent update have articulated modelling for their STACK and SCOOP units.




Basically their modelling shows for the STACK units, they maximize PV-10 with 8 wells capturing 9.6 million BOE with a value of US$ 87 million based on WTI at US$60 oil and gas at US$3.00.

For the SCOOP they achieve a maximum PV-10 value of US$ 68 million capyuring 4.8 million BOE with 4 wells per unit.

The differing values for different numbers of wells per unit can be seen . This is all relevant to BRK because CR is one of BRK's operators so the modelling applies to us.

Each full drilling unit is 1280 acres so you can work out the NV-10 value per acre . However BRK also have WI interests in some 640 acre half drilling units but I'm not sure which ones .

Things to note.

1) Each individual well WI is basically the BRK WI in a particular unit.

1) BRK have stated they are not going to be developers so it is unlikely many if any of the units they are in will be fully developed before they sell .... so I personally wouldn't apply the $87 million per full STACK unit or $68,000 per acre value, or US$ 68 million or US $ 53000 per full SCOOP unit acre to any of their holding at this stage... I would apply the US 20 -24 million or US $ 15600 per STACK -18750 per SCOOP acre for a single well.

2) It may be fairly reasonable to apply the CR modelling for all BRK STACK and SCOOP acreage because of the proximity to the modelled units.

3) At this stage all their wells are the first well in each unit so one could roughly work out the NV-10 on a current single well basis.

4) BRK has 400 net WI acres in Blaine county STACK , 600 ares in Garvin SCOOP and 700 acres in Stephens county SCOOP


Roughly IMO the current value on a single well basis for the 1700 WI acres is about US 31 million ( 400 x $15600 plus 1300 x $18750) plus US 1,1 million for the royalty acreage. ( the purchase price BRK paid for the RI) or about 4 cents per share.

What the modelling does show is the significant upside for value capture as the units get developed.

Just for fun, ascribing the full modelled NV-10 value to the current position we get

a) the 400 STACK acres gives US$ 26.8 million
b) the 1300 SCOOP acres gives US $ 68.9 million

or US$95.7 million plus $1.1 royalty interest .... roughly 12 cents per share

Please be mindful that NPV is not market price .

Please also be aware that the above will require 8 wells drilled in each STACK unit and 4 wells in each SCOOP unit. As they have articulated, BRK will sell way before full unit development so they will not get anywhere near those maximum numbers IMO.

Cheers

Dan