What can I say ...
#1 Prior post had some errors in the application of formula and inference extension (or put more simply ... I goofed).
#2 The mistakes IMO have a material effect on short term analysis and lesser on the 5 Year view.
#3 This analysis focuses on production and REVENUE (so no costs and no NPV discounting of revenue). $$$ are NRI in the well.
#4 I have not forgotten NGLs. Because NGLs are part of the gas stream delivered into the sales channel. Therefore the price per Mcf OEL receives will get an uplift to compensate for the value of the NGLs in the gas stream. So using the current Qtrly as the example I would be adding $0.27M (the value of the NGLs) to ~$1.244M (which is Lightning production of 755,156Mcf x $1.66/Mcf) to be $1.524M for the produced 755,156Mcf (or ~$2.02 Mcf). Keep that in mind when you look at pricing
#5 Rapid summary again for the following table ... Remember it is OEL NRI non discounted.
a. Center Yellow box is 100% of 5 Yr Production at the pricing midpoints
b. LHS Yellow boxes are at 75% of 5 Yr Production.
b-1 Top LHS is Low Gas/Low Oil Pricing
b-2 Bottom LHS is High Gas/Low Oil Pricing
c. RHS Yellow boxes are at 125% of 5 Yr Production
c-1 Top RHS is Low Gas/High Oil Pricing
b-2 Bottom RHS is High Gas/High Oil Pricing
That's the overall picture ... the argument is our WI Cost on a $10M AFE is $3.75M for highlighted revenue estimates.
With the centrepoint its about a 134% in 5 years. Another way to express is
A little off topic but also important is remember in the Residual Earnings model when I was trying to describe the relationship between the Cost of Capital and what it needed to earn so that it contributed to residual earnings. This alone shows how difficult that can be for high cost of capital companies. Now it also is a little bit unfair because with the updated models there is significant change in the front half of the production model ... and we all know that a dollar today is worth more than in a years time
The other REALLY IMPORTANT part is the estimate of 5 Yr production (which I'll review in a moment) which is:
Total Gas = 10,246 Mmcf (that is a lot of gas in 5 years BTW ... ignoring big shale wells) or 1,706 MBOE
Total Condensate = 154,420 Bbls or 154.42MBO
Total MBOE = 1,860.42
Just keep in mind the initial reserves assigned to the Field after drilling Green #1
Now the real meat and potatoes ... what is behind those estimates.
I'll start with 2 curves (one for gas and one for condensate)
and
What I am doing here is taking the actuals from the TX RRC filings for the first 9 months then keeping gas flat (at 12Mmcfpd) for next 3 months and then applying previously fitted decline curve for the next 48 months. Similarly condensate is done the same way. I then fit an "Exponential Smoothing" curve to the whole thing as an overall algorithmic fit - the objective is for both to roughly produce the same amount.
The table below illustrates this
Almost there .....
What I really wanted to know was the impact on FY'21 which for me translates roughly to:
Year 2 Production total from Green #1 and Year 1 Production from Green #2
And that Green #1 and Green #2 exhibit the same production curve
All that means Lightning Field produces
Gas = 3,051 + 4,383 = 7,384 Mmcf (and its a premium due to NGLs)
Condy = 94.336 + 129,753 = 224,089 Bbls (which is a whopping avg of 622 bopd)
That is a material difference to Net Income used in the models to construct Residual Earnings.
So fellow shareholders and posters ... can anyone see if there is an obvious mistake somewhere as it looks awfully good (and way above my initial thinking that it looked like good news but not that good to be material change).
Kudos to
@boysy1 and
@ronstieb for pressing the buttons. I still can't rationalize why, if the news is actually this good, why OEL doesn't make a song and dance about it (given their history).
(20min delay)