Greetings Old Geo and all holders,
I'm only a new SH of NWE (and only in a small way) and I suppose it will show by the following calculations.
I can say that I'm greatly impressed with the depth of knowledge of posters here and also with the size of the gas find at Lockyer Deep 1 well. But I can't seem to grasp the calculations some have put forward to estimate the NWE SP in future.
Here is a "back of the envelope" effort by me. I am sure I have made some mistakes and I would be glad if you good people would point them out to me.
So here goes:
- We know that the LD well was flow-tested and the maximum sustained flow rate was 102 mmscf/day.
- We also know that some sand was drawn into the flow when it was above 50 mmscf/day.
- We know that the gas composition was 87.5% methane.
- The condensate yield was 3.2 barrels/mmscf.
- NWE has a 20% ownership of the gas.
I am assuming that NWE draws off the gas at a rate of 50 mmscf/day to avoid sand contamination. So NWE's portion is 20% of that, which is 10mmscf/day. Let's say they also get 30 barrels of condensate at, say, $80/barrel ($2400).
The gas is only 87.5% pure, so they will get paid for 8.75 mmscf/day. So how much is that worth?
We know that LNG is currently being exported from Australia for roughly US$12/mmBTU and 1 mscf = 1mmBTU.
So 1 mmscf = 1 billion BTU. So 8.75 mmscf = 8.75 billion BTU or 8750 mmBTU.
So NWE's daily paycheck is 8750 x US$12 = US$105,000 = AD$153,000 at mid-market rates.
That, plus $2400 for condensate equals AD$155,400/day x 365 = $56,700,000 per annum.
Now that is gross, of course, and out of that must be paid salaries, admin, royalties, repairs, etc etc. I don't have the faintest idea how much they would take.
Now of course NWE might use a higher gas flow rate and filter out the sand.
They might drill more wells and increase flow rate that way.
The price of LNG might go higher. But none of these things are guaranteed, so I prefer to be conservative.
Just ignoring the effect of operating costs, knowing that SOI are about 6.7 billion, then EPS = 0.85 cent.
The average oil & gas PER on the ASX is about 7, so 7 x 0.43 = 6 cents.
So either NWE shares do not have much more to gain to reach "fair value", or I have made a swag of errors! (I think it might be the latter! LOL) I hope "fair value" is more like 20c as suggested by other posters.
Cheers,
FHC
