Hi Ya,
I totally agree one should factor in the GCoS. But I left it out on purpose for several reasons:
1) As you know, GCoS is more a relative target selection tool than an absolute one. Unless the PVD and FAR targets are assessed under the exact same criteria, their application to (comparative) risked resources can be misleading.
2)Both PVD and FAR targets, pre-drill, were/are characterised by a paucity of local data; real high risk basin openers. I personally put little stock in PVD's GCoS of 30% for Toubkal as well as their 30% GCoS for the Aptian (309mmbbls mean) within MZ1....which are just too high for a basin opener (IMHO).
3) The difficulty is assessing the real GCoS of multi stack plays. If the Aptian does come good then the lower Jurassic fans probability increases; but the assumptions behind progressive migration/trap/seal are unknown.
4) The subjective decision just to drill the well in the first place. Every coys risk assessment/decision processes are different. Its generally easier to hit the 'Go' on a big well such as FAN 1 when the POO was around $100 versus US$60 when the big MZ1 well was announced. Just on this alone, one could infer that MZ1's risk metrics should look relatively better than FAN1 (pre-drill). But, IMHO, no one really knows.
5) I can't find any data (or notes from my discussions with both coys) that suggests that there was any real material difference in the GCoS pre-spud for both wells. I'm not going to argue a few % points difference here.
But Ya, I totally respect your technical knowledge in this topic, and would greatly appreciate any of your comments about the relative pre-spud GCoS for both FAN/Beer/ and KZ1/Toubkal.
Please keep in mind that my analysis was purely for relative purposes only. It is just trying to look at how the market valued FAR at spud and applied the same metrics to PVD to just have a look at how differently the market is assessing the at-spud risk/valuations for PVD.
If we assume the pre-drill GCoS for both 2 well programs are approximately the same, PVD at-drill value would equate (give FAR's pricing at the time) to about $1.66 (Energy index adjusted).
I'm not for one second suggesting PVD should be trading at this. Its more to suggest that the collective of POO, assessed risked and lousy mkt sentiment have combined to make PVD about a quarter of the at-spud (relative) value of FAR at the time. We can all apply our own adjustment factors (I applied my 'arm-waved' 50%) to assess risk and sentiment. But the take-out for me was that there appears to be substantial (excessive IMHO) risk/negative sentiment priced into the PVD spud price...relative to FAR.
I knew if I posted that PVD was cheap (IMHO and relative to FAR) at spud, that some posters would expect me to back it up empirically. As soon as any numbers are put up, so too does the target; one's been on my back, off and on for 30 years now so I expect it. But it does bring on the discussion which is great for all. (the PVD thread has been deafeningly silent of late).
Personally, I think the phrase "The price is what it is" is a bit of an intellectual cop-out. Bring on the analysis, the debate, the knowledge, the interest.
Really looking forward to your (Ya) geological and technical comments as this exciting program unfolds.
Cheers,
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