elephant country?, page-38

My thoughts on this in 2 parts:

That $15 referred to on the slideshow is a metric for IGV, & has been cross-wired with NPV.

Its got nothing to do with transport/ operating costs.

Most explorers use an IGV to value their prospect (pre-drill).

So once the discovery is proved commercial then the SP appreciates (not necessary to that level), more so when they actually start generating revenue from it.

Simply put, on CTP's slide

JW1's 'High estimate' of UOIIP: 500 mmbbls
(For now I prefer 35 mmbbls unrisked & 8 mmbbls risked as per slide#8, 19/5/10)

So an IGV of $15/bbl * 500mmbbls * 15% Recovery = $1125m
Shares on issue: 907 mil
Unrisked value: 1125/907 = $1.24/sh
CoS= 22% * $1.24 = 27c/sh risked IGV/sh

One can use this for Surprise.

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The second part thats been referred to, i.e, costs etc is useful frm an NPV valuation perspective.

Say if the POO is A$80/bbl, an operator's costs of trucking/operating/ maintenance etc are say A$20-30/bbl, then the difference is their revenue per barrel (b4 10% state royalties, depreciation & 30% company tax).

Extrapolate that revenue over 10 years & discount it by 10% to arrive at its NPV @ 10% over 10 yrs time.

So that figure of $15/bbl IGV is entirely different to the $20/bbl trucking costs.

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Mereenie has an NPV of $175mil for its proved 150 bcf gas + 2 mmbbls reserves + 70 mmboe contingency resource.

This can b split 65:35 between STO-MGN. Doesn't necessary mean they'll get that price frm a potential buyer.

Its all part & parcel of valuing a prospect in the ground or after its declared 'commercial' & goes to 'production'.

Different ways to skin a cat. However, the stk mkt doesnt see things that way when the price spikes or drops on any operational newsflow, hence the imbalance between current SP, its NPV/sh & what's in the ground.

Just my thoughts.