Ann: Business Update Presentation, page-126

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02/05/21

06:48

Post #: 52873544
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Originally posted by psi81: ↑

It's about the loss of 2P oil reserves rather than the cashflow impact this FY. These Cooper fields tend to have quite high NPV per barrel because they are fairly short-life producers (so low impact from discount factor) and they have high operating margins once they are developed (once the well cost is sunk). So the hit of wiping off 18 million bbls from producing fields like Bauer could mean an impact of, say, A$30/bbl * 18 MMbbls = $540M to BPT's fundamental value. We'll have to wait and see what writedown they take at FY results in August, it will depend on what they do with their oil price assumptions but I think it's going to be a big hit.

Then there's the lesser impact of the gas downgrade, and on top of that is the downgrade to the further exploration prospectivity of Western Flank (suddenly those targets in the P&L database look less attractive on a risked basis) and a hit to the market's confidence in BPT's technical ability.

Any company can have a hit like this on a single field, it's the nature of the industry. Estimating oil reserves is fundamentally an uncertain business and sometimes you'll just get it wrong. Compared to some of the major reserves scandals like Shell's in the early 2000s this is fairly minor. So I wouldn't be concerned if it was just Bauer, but IMO it's more of a concern that this appears to have happened on multiple fields which suggests a potential systemic issue.

All that said, I think the hit to the market cap today was around $1B? That does seem overdone to me. I'm fully exposed to oil & gas (in truth, overexposed and need to reduce) so not looking to buy into BPT but I do think it looks attractive as this price. Waitsia is a gem, they are making some nice new finds in Victoria and just generally reminding Origin they let Lattice go way too cheaply. This reserves issue is specific to the Cooper Basin and doesn't affect their other assets

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Nicely supports my simple analysis, thank you.

BPT Price at posting: $1.28 Sentiment: Hold Disclosure: Held
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Last $1.27		Change -0.015(1.17%)		Mkt cap ! $2.874B

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Ann: Business Update Presentation, page-126

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Ann: Business Update Presentation, page-126

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