I understood it is BAS that selected Speke-1, and offered Apache the opportunity to buy there way into 60% of p42 if they bear the entire costs of the well to production.
The location was chosen based on the seismics they conducted.
I would assume as you say they they chose the lowest risk well in order to fund the others. If the well is a duster then no doubt they will have problems raising the money to fund their 20% in other drilling in the tenement. I think it is this fact (that SP will crash if it is a duster) that has kept their SP down to 12c instead of running up to 20-30c.
As I have posted - the risk-adjusted mean expectation is 38.8 million barrels. Obviously if the seal if gone they will find nothing and the risk of this is taken into account in their prediction, If the risk of no hydrocarbons is 60% then their mid-case expected reserve if there are hydrocarbons is about 100 million barrels reserve.
Thus the risk-adjusted SP based on this should be:
risk-adjusted mean target size x % revenue interest x about $30 per barrel reserve / number of shares (which assumes oil price falls back to $60-$70/barrel). Using these figures the risk-adjusted share price should be about:
38,800,000 * 20% * $30 / 173 million = $1.34.
If they find oil and average size is 100m barrel reserve then SP estimate is about $3.35
That is an 11 bagger from here from the MEAN case.
This can be re-stated as:
A 60% chance of losing half your money and a 40% chance of a 20-35 bagger.
I find that astonishing and cannot help but be sceptical about their "mean" target estimate. It just sounds too good to be true. If it is true then ON AVERAGE this should be an easy 10-bagger, with a range from about 0.5 - 25 depending on the presence/absence of hydrocarbons and the amount of oil found.
I'd be interested in feedback on these estimates.
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