meo valuation, page-9

iam,

Thanks for the very comprehensive and informative post. I have been looking at MEO again and you have brought me up to date.

You emphasised the Gambling nature of the activity very well and the way the company has offset its risk via farm-outs so if there is NO Discovery Gas their loss is minimised.

MEO has been doing this permit farming for quite a while now.

I noticed the Artemis Risking slide 33 in the presentation 18/11/09 draws on a calibration with Zeus.

Zeus, ended up being P&A with "the primary objective sands to be water bearing" at 13/2/09. I recall that the Zeus build up was that they were targeting >15TCF GIP Potential with possible DHIs "bright spots" showing on the Seismic, High Amplitude Soft Kicks and similar amplitude and class 3 AVO responses to Perseus.

When you look at that Risking Table for Artemis

Reservoir Presence and Quality - 80%
Trap - 50%
Source presence and quality - 80%
Seal Adequacy - 70%
Maturation and Migration - 90%
Timing - 100%
Preservation - 100%

You get a COS 0.8x0.5x0.8x0.7x0.9x1x1 = ~20%
Then they increase this COS x1.6 to get 32% based on the "Reliability" of DHI, even though the Zeus DHIs had no credibility in the end. I would leave the upper bound of COS at 20%.

As this table invokes Calibration with Zeus and Zeus had an Ultimate Success of Zero , is 32% far too high for Artemis ?

As you rightly point out to the Newbies that COS could be an ultimate Zero and Artemis P&A.

I would like to see the company say that the COS can be Zero(P&A) or 100%(Discovery). Only if a Discovery is made do any valuation calculations make any sense. So rather than set up a process to reach a COS figure between 0-100% which is then used to come up with a spurious valuation conditional on a Discovery why not do the valuation on the basis of a discovery and use the other variables like recovery factors etc. The GIP estimates are hardly definitive anyway - how reliable is their estimation ability - you will only find out if they make and discovery and then prove it up.

I understand the need psychologically when speculating in this area to have a "Feel" for the "Odds" and that is all that I reckon the COS calculation achieves. It can be useful for that but not for "Valuation" - IMHO


Cheers