heron south1 to production test 235m gross pay, page-16

Hans Brix,

Here’s why I think your target of 1.40 is easily achievable.

1. Flow rates for Heron & Gurame will be in within a week (I see some spanner said they are unknown and that’s why we won’t make 1.40, ok well wait a week)

2. Heron & Gurame could both provide a serious resource upgrade, Heron results to date are pointing towards some special. When you add an extra couple of tcf of gas your talking serious $$$.

3. MEO have up coming farm-outs of WA -454 & Seruway, the industry has already shown a great deal of attention to these farm-outs. In particular they are “excited” about Ibu Horst in Seruway.

4. The above farm-outs will provide serious cash inflow as MEO are likely to receive reimbursement costs.

5. MEO’s cash outflow will be minimal in the upcoming 12 months as their out of pocket costs with seismics & drilling will be done. There is no pressure to raise capital and the market knows this.

6. Once reserves and commerciality of permits have been proven up finance becomes a hell of a lot easier to obtain.

7. Proven resources is what will attract the brokers & funds, which will result in a sudden increase in buying, pushing the sp up in a hurry. Valuations on a proven 100% minimum 500bcf resource in Gurame and anywhere from 5tcf – 10tcf in Heron (25-50%) will show that a $1 valuation of MEO is ridiculously cheap.

8. Gas prices in Indonesia will only be going up in the coming years, their high prices won’t disappear with the wave of a wond. The location of Gurame & Heron for that matter (via Tassie Shoal) provides big $$$ savings in transport & time.

9. With Heron being proven up, valuations start to be done on Tassie Shoal. The slow start to realise whatever option MEO go with that TS is an asset of considerable value that can bring in a constant revenue stream and/or a big one off payment.

10. I can see within 30 days from now (sorted before xmas) official confirmation will be given that ENI will drill Blackwood. Given how thorough they have been with Heron this could be an $80m drill in itself.

11. The SPP was completed over a month ago allowing plenty of time for those who participated to sell at considerable profit. This issue will have an immaterial effect on the SP going forward.

Theres probably many reasons I have missed but I could be here all day.

Anyway you just have to have a look at the MAD chart to see that going from our current SP to 1.40 can happen within 3 months, they do have 100m less issued shares but once Gurame & Heron is proven our assets will be 3 times greater than MAD’s.