This is what I posted on Share Scene ...
The tight sandstone in Yarrow is very very bad news for INP shareholders.
The rule of thumb is you need 1 gas step-out well for every 8 bcf of gas.
If the sandstone in and around Yarrow is intermittently tight, then you'll need 2 stepouts per 8 bcf of gas, because 1 in 2 will hit tight sandstone.
Therefore, rather than needing to pay $2m in capital costs per $14m of gas (assuming gas prices to be about $1.7m/bcf), you need to pay $4m.
But in the case of Innaminka, we have the 12.5% Directors Cut - the overriding royalty that company management wrote themselves pre-float.
This means they have to pay $1.4m (35% JV share of $4m for 2 wells) up front for 35% of 8 bcf of gas $4.3m ($14m*0.875*0.35) over many years (at a flow rate of 5 million cubic feet a day, it takes 1600 days to exhaust 8 bcf of gas).
Ian Whitchurch
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