inp getting slaughtered, page-25

re: valuation then between yarrow2 and ipo
Tastarga's stuff in quotes

"Ian, think you are being generous to Inp on a few fronts:-
1. Flax DST at 500 bbls a day, against a 5.2mmbl field-thats a bit high for the recoverability isn't it?,(ie the field is not that big?)"

Thats why I said I needed more data on Flax's production test ... I dont know if they aimed the well at the 'bump' the oil was in, or at the 'bump' in the layer the gas was in.

"2. Due to the directorsrelated parties royalties you should not be using A$15 barrell for a reserve valuation, but a significant discount to that. With the royalties at 12.5% well head return, that is around a 30% NPI on current revenue/costs-drop the per barrel reserve rule of thumb back to A$11 (and that is being generous)."

Fair call.

"3. The Yarrow step out failure creates a whole new world of uncertainty depending on its reason for site selection. If it were a standard step out, ie non aggressive/opportunistic, the reserve reduction is actually a multiplier-it would not reduce the area for BCF collection by 20% say, but it actually is say 50% (I can diagrammatically show what I am getting at-perhaps it is best explained by the area of a circle, if you halve the radius you more than halve the total 'area!).
Conversely, if the the step out was very aggressive, it may have the opposite effect and only marginally reduce the reserve.
Besides its only gas anyway and they are still many many moons from having a contract to sell it-perhaps your value per BCF should also be discounted for time as well ?LOL"

Gas is already more heavily discounted than oil to get down to A$1/mcf.

From looking at a map of where Yarrow-2 was, it seems to be moderately conservative - it's to the south-east of Yarrow-1, and not on the edge of the Yarrow field.

"Be very careful playing with this stock."

Seconded.


Ian Whitchurch