need seismic..., page-10

kalmsg...

Thanks mate...just need to remember I am really just offering musings.

An interesting graphic follows...seems Orca formed a view on the likely closure for Kiliwani North pre-drill?



My understanding is the red zone for Songo Song is the GWC outline...representing a total GIIP field size near 1.4tcf

The Songo Songo field outline is pretty close to 10 times the outline size of the pre-drill Kiliwani North outline shown to the right (I have mesured it)...this immediately puts 140bcf GIIP on Kiliwani North, which is not that far off the re-drill P2 numbers of 100bcf from Aminex, which is probably the result of a smaller vertical extent on average?

Speaking of 2P gas...Orca fully expects to convert all 1.4tcf of GIIP to P1 reserves in time, so these numbers need to be considered as more than just arbitrary P2 upside targets.

Now...once again we need to remember that the Kiliwani North target outline was prepared on the basis that the GWC was assumed to be the same as Songo Songo...of course we now know it was not!

It is likely therefore that the expanded Kiliani North outline, due to the lower water contact, may well almost triple the expected accumulation size...I think it is fair to say at least a doubling is expected in my view.

On this basis, adopting the pre-drill outline that suggests 140bcf...adjusted back down to the 100bcf pre-drill P2 numbers…a doubling/tripping will see likely GIIP numbers approaching 200-300bcf!

Thats between 40bcf - 60bcf (net) to KEY.

Even at just $1/mcf in ground value, we get US$40-60m on this one field...arguably however, with guaranteed access to existing infrastructure and current industrial gas prices around US$11.50 on the Tanzanian mainland, one might argue in ground prices closer to $3/mcf, for this particular field, in this particular location, adjacent to existing infrastructure is more applicable.

I believe part of the initial Tanzanian governments "take" on the Songo Songo field, as part of the pay-off for the initial infrastructure outlays, was for a fixed price on a guaranteed delivery amount per day (current about US$2.20/mcf), albeit on a gradual sliding scale, until the year 2024.

This is a contract with Orca…I do not believe it carries over to KEY, however I intend to clarify this issue, especially given KEY will have to pay Orca a fee for processing their gas.

Anyway, I personally feel pretty happy valuing Kiliwani at $3/mcf in ground, given the specifics at this location and assuming they secure sales contracts above $8/mcf on average...and maintain flow rates in the 25-50mmcf/s range per well...more or less as they have at Songo Songo.

I accept some will use higher in ground numbers, whilst other will prefer lower…but for me, I will be valuing the results of Kiliwani North to KEY on this basis.

As such…

100bcf = 20bcf to KEY = supports $60m market cap
200bcf = 40bcf to KEY = supports $120m market cap
300bcf = 60bcf to KEY = supports $180m market cap

If this is not your thing, a simpler way is to look at flow rates and likely production...at 40mmcf/d (8mmcf/d) net to KEY, after processing tolls and likely costs in the range of US$1.50/mcf, it is likely KEY will net US$52k per day based on sales of US$8/mcf.

Hard to predict decline rates at this stage, but Songo Songo pressure declines are showing 1% per year on some wells...so there is a good chance that high flow rates will persist for the initial years at least.

So...at US$52,000/d, we are looking at KEY banking something like US$19m per year...or just over AUD$20m per year.

A 200bcf field would easily support PE's of 8, so based purely on production, we get a supported market cap of AUD$160m for US$8/mcf gas sales...just for Kiliwani North!

Remarkably similar number to the above!

Anyway, its late...so I'll let you do the fully diluted numbers per share...

JUST FOR KILIWANI NORTH!

lol

Cheers!