BRK (ASX) Banter and General Comments .. BRK

Originally posted by danpech: ↑

Hi mate

Thanks for asking a " critical " question.

Firstly, all wells will be horizontals.

BRK have guided from their reserve report , that their share of drilling the 20 wells the report is based on , will be ~US$151.8 million.

BRK guided their share of the 4 wells to be drilled in the FMDP would be ~US$26 million.

They also guided that the FMDP would produce 715,000 BOE net to BRK in the first 12 months of production.

Extrapolation well productivity is a little challenging as cant really use the FMDP as a guide . The 4 wells will have ~30,000 feet of lateral coverage ( 2 x 10,000ft + 2x 5000 ft) , 50% of which is Sycamore and 50% is Woodford. We don't have a breakup of how much of the 715,000 BOE is Sycamore vs Woodford but it will be more than 50% being the more productive zone. As no other development will have such a high % of the Sycamore it would be inaccurate to extrapolate the FMDP.

I would have to go through all the Courbet well records up to now, plus the Gapstow , and the 4 BRK wells to calculate the production per lateral foot and average that across the Sycamore wells and Woodford wells separately, then extrapolate that over the expected BRK development wells. I can do that but it will take a while.

One thing I will extrapolate, is the 12 month FMDP cashflow, using the last BRK presentation as a guide.

If we assume todays prices of US$ 72 per barrel oil, and current gas, NGL prices, the net margin per BOE is closer to US$ 35.

Using that as a guide, the 715,000 BOE 12 months production will produce ~US$ 25 million net cash flow, or a payback in ~12 months. At US$ 40, it will produce US$ 28.6 million cashflow in 12 months, with less than a 12 month payout.

I'll see what I can get from the other stuff, but it will take a while.

Cheers

Dan

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so with an approximately 12 month payback period on this modest batch of drilling we very likely won't see a significant benefit until well into 2025?
This also doesn't take into account that they will need to fund the next batch of drilling, so they will likely be using the funds from this first batch drilling program to fund the next correct.

This will in turn likely limit free cashflow available for other purposes including returning cash to shareholders. This will likely mean that any future buyback will likely be conducted in the same ultra conservative manner as the previous one that has seen sp at all time low.

So by the time they drill out and flow this first batch of wells it will be late 2024, then late 2025 by the time it achieves payback. It is likely probable they will commence work on the second batch drill program at some point in 2025 and will be completed in 2026 and achieve payback in 2027.

So this is starting to look like it will take nearly a decade to "monetise" with it being highly unlikely to see any sp appreciation for ANOTHER TWO YEARS, unless we see a massive sustained oil price hike (unlikely imo).

My question for you my dear dan is what the f***
How is this stock anything other than a lifestyle company and complete shareholder failure.
Even if over the next the 3 years they luck out enough to claw this dog up to 2-4 cents a share it will still have been a failure for everyone bar the few who only brought exclusively at 1 cents in more recent times while avoiding having to wait FIVE+ YEARS to get a roi.
The extremely drawn out nature of this "monetisation" will be so heavily diluted by the time holding that any eventual profits by long term holders will be less then if they had invested in a decent blue chip.
All in my opinion of course, I welcome you to correct me, but given that this company will almost certainly NEVER get enough buyers support to drive significant sp appreciation it will be dependent on capital returns from the company to deliver any gains to shareholders. This in turn will likely cap the potential returns we would see.

So last question dan, do you believe in the end game shareholders will realistically see enough REALISED SHAREHOLDERS RETURNS to justify having held this as I believe the potential returns that will be seen by capital returns will be heavily diluted by opportunity cost, time holding vs roi as whole over 5 odd years. Do you think by 2026 you will have made enough on this to not regret investing in the company.