Gee OPM that's a tough one - plus I'm traveling, don't have all my stuff, slow internet etc etc.
But here goes.
But first, reference back to my earlier post 7202362.
This is dependent on what resource we can define (it will be a 3P initially and sooner it gets to 2P the better our value)
The guess was with 1.6Tcf at 20% EUR yields 320Bcf at $0.50Mcf has a value of $160M derisked at 80% discount gives $32M or 10cps (assumption being options are converted but right now it would be 16cps)
Could make a couple of observations: (a) No value assigned to Karoo (b) No value assigned to MS (c) No value assigned to existing producing asset (small)
Therefore stock trading at potential 6cps discount to TC target.
Based on that observation anything around a resource of 300Bcf should realistically get us to at least 16cps.
Now another way may be its a highly pressured well flowing at IP of 10Mmcfd which would be 3.5Bcf per yr - but declines are steep for these shale gas wells. For grins say you could get 3 Bcf in year 1 and at $4Mcf gas thats $12M and say NRI 75% that's net $9M - recover cost of well in year 1. Well then drops to say 2Bcf yr 2 and 1Bcf year 3 and for next 7 years - NPV that 10 year revenue stream (don't have my calc) but its a good number - more than $10M
If that were able to be proved to be repeatable across the acreage (by the subsequent delineation wells) and its say 1 well per 640 acres then that's 100 drilling locations or so (so $1B). Easily attracts JV partner.
OK stop salivating OPM - you get the picture.
My guess 16cps with 320Bcf resource ought to be ballpark (but who knows anymore). Could be 20cps if less risk applied (but I doubt it).
Add in MS success - oppies are converted - no CR - delineate wells across lease and then JV and off we go.
Now I'm salivating.
All in my humble opinion and figures not checked very well so subject to error.
CEL Price at posting:
10.5¢ Sentiment: LT Buy Disclosure: Held
