p/u another 400T only but still i cant say how insain this stock is at the levels that we are able to purchase here is some notes if your in a NWE kinda mood..Just a BIT OF INFO ALL CBA ANNALISTS SHOULD HAVE DONE. AND IF THEY DID, THEN THEY WOULD NOT HAVE HAD A STRONG STRONG SELL on NWE...I GUESS CBA WILL BE SHORT 10 ANNALISTS SOON . A month ago, NWE acknowledged to the ASX that it was negotiating final details of a farm out of its interests in the North Sea ‘Bounder’ gas prospect and the tenement off NW Australia. The other recent news is that NWE has appointed a well qualified and experienced COO,Bill Bloking (BHP Petroleum) this month. AED intended to announce its formal review of its reserves by the end of January, but with the COO appointment, the reserves estimate were delayed. The COO will be extremely comfortable with the estimate released to the market. This slight delay lead to minor softening of AED / NWE price over past few weeks but as the announcement was an incredible estimated 100,000,000 barrels we should start to see the market adjust its pps upwards to a more realistic level of $1.50 - $1.80ps.
NWE valuation:
1. AED royalties on current reserves (P50) of 100mill barrels – A$33 mill per NWE announcement. (Note the announcement below is incorrect when it states that the royalty is calculated on A$50 per barrel – it should be US$ per barrel – and may be conservative because of AED’s very light sweet crude, which will sell at a premium of US$4 per barrel over WTI.) With fast depletion of these reserves – over only 3-4 years – the NPV after tax (adjusted for $9 mill of tax losses available at 6/06) is roughly $80 mill, or 0.50c per NWE share on 200 mill issued. This is a minimum value and represents royalty income for only about one quarter of AED’s tenement. New reserves will be announced progressively over the next couple of years. At AED’s AGM I was told that they had employed one of the world’s best reserves estimation specialists and so the risk of a reduction from the 100 mill barrels reserves estimate is probably slight. Nevertheless, it isn’t guaranteed. But much more likely is that the reserves announced in Feb will include both an upgrade to the 100 mill barrels for the NE field, plus some reserves for NE 2 and possibly some indication of reserves elsewhere. Over the next two years, in my opinion reserves will be increased to more likely 200 mill barrels, with the NPV value from royalties – over 10 years – increasing to about $1.00 ps if oil at US$50 per barrel so pro rata from there according to the current price of oil at US$60= $1.20 ps And at US$70= $1.40 ps these figures are on the royalty's from AED alone .
2. NWE has a passive up side cash flow of about $1 million pa and increasing with time and progress from a small share of WA production. This income should fully offset on-going admin costs of NWE's day to day operation.
3. Cash at 6/06 was $6 mill, or 3 cps. NWE has recently sold off its three USA interests in gas fields for a net $2 mill with the other two yet to be sold. It’s reasonable to expect NWE will have a net A$5 mill from all sales in 12 months, or 2.5 cps. The Indian press reports of the Bounder and AC/P32 (NW shelf JV) suggest that NWE may receive $8 mill from the realignment of interests.
4. The Bounder prospect has to be signed off by the new JV partners and approved by UK’s DTI. The positive news is that it appears that the new JV will be granted the lease, which is in a very prospective address- located between two major and producing gas fields off southern UK. With pipelines and other infrastructure no further than 15 km away, even a modest gas find would be commercial. A major find would give a very strong push to NWE’s price. At this time, we don’t know the outcome of the JV negotiations or NWE’s future equity in the field.
5. 6. AC/P32 drilling has to begin 12 months from May 07. Drilling could be sooner if a drill-ship can be procured. The tenement is located in the Timor Sea and is surrounded by discoveries and prospects. (AED’s Puffin fields are to the west.) A dry hole was drilled a year ago. The company claims that there are many good prospects to be evaluated.
7. Other interests/association with Bharat Petroleum etc...Value ?
In summary, NWE appears to have a minimum value of tangible assets of 5.5 c cash ( in the bank now or receivable this year) plus a minimum PV of 12.5 cps from AED royalties, giving 18cps with little downside. The AED upside should add another 12.5 cps and success with Bounder or AD/P32 in the next couple of years would be very rewarding. Catalysts for rerating will be the AED reserves update in Feb and announcement of the Bounder and AC/P32 JV in the next month or so.
AED’s share price has risen five times since last April, NWE’s from 10 c to 16 cps - only 60%. Given that perhaps half of NWE’s April value (5c) was represented by its AED royalty, then half of NWE’s price should have risen in line with AED ie 4.7 times 5 cents, plus 5 cents, or to 29 cents.
In my opinion, NWE looks a good prospect, without much downside, for the next couple of years.
Disclaimer required : “ Do your own research, ANG GET YA OWN HONEY SMACHS this is not a recommendation, only information.”
OIL BARREL ARTICLE
Norwest Energy Putting Finishing Touches To Its Puffin Oil Field Development Nowadays, Perth-based Norwest Energy has a strong international flavor with assets spanning the UK, USA and India. But it is events closer to home that will most likely dominate the headlines in the year ahead.
The company, which is quoted on the Australian and Frankfurt stock markets, is looking at first cash flow from the Puffin oil field development in the Timor Sea – in which it holds a 1.25 per cent interest – during 2007. Current estimates suggest a start-up time of around June, with initial production of 30,000 bopd.
Better still for Norwest is that the development work led by operator AED Oil Ltd comes at no cost to the firm, which holds the same stake across the whole AC/P22 block. This block holds considerable upside with numerous prospects yet to be drilled.
According to Norwest, the potential royalty cash flow from Puffin alone will be around A$33 million based on P50 reserves of 40 million barrels and an oil price of A$50 per barrel. Norwest CEO Joe Salomon says this will be a massive boost for the company, generating income for future project expenditure.
Nearby the company holds a much juicier 30.1 per cent stake in block AC/P32, operated by Coogee, an area surrounded by production and discoveries. The group plans to sink a well in this area sometime after May 2007.
A bunch of wells are also being lined up for the onshore Perth Basin too. Drilling is expected on block EP368, in which Norwest holds 10 per cent, though it has just withdrawn from EP437, because of a higher risk exposure (33 per cent). On block EP413, Norwest (1.278 per cent) also expects to see the Freshwater Point exploratory well kick-off during the first half of 2007. Close by, it expects oil flow at Jingemia in L14, 340 km from Perth, to return to 4,500 bopd following recent development drilling to arrest production decline. Again, Norwest holds a 1.278 per cent participating interest.
Despite this flurry of local activity, things are progressing across the sea. Despite a gradual withdrawal from the US market, including the recent sale of its West Virginia shale project, it remains bullish about its overseas portfolio.
In the UK, Norwest is looking to extend its presence in the Southern Gas Basin and is waiting on a couple of permit applications. Going forward, India is coming into play, with the establishment of a New Delhi office, and a number of deals reportedly on the table. Here, Norwest is keen to take a slice of the increasingly active upstream but it also lining up potential forays abroad with Indian partners.
The first concrete step was a co-operation pact with Bharat Petroleum Corporation Ltd, India’s largest refiner, for joint exploration overseas. Under the deal, Norwest will act as project leader to pinpoint opportunities for further collaboration. Salomon says the tie-up underlines Norwest’s Indian and international ambitions. The company is eyeing other markets too including Africa.
NWE Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
