risk vs reward

I have had a little play with the numbers regarding the Kenya L8 tenament. As someone here has suggested, PCL are a one well company. Now, what I mean by that is that they have lots of pretty speculative plays, and if one is a good'un it will lmake the company.

So, back to L8. Now, as I will mention I'm pretty sceptical of my own numbers here, but it's what seems to make sense to me. I'm putting it out here for some comment and debate, and I'm not claiming that this is correct - so be nice.

So. PCL are free carrying 25% of L6. Now, rdcent update from PCL states that L8 has the potential for P10 recoverable reserves of 3.6 billion barrels of oil, of 1.5billion barrels of oil plus 4 billion cubic feet of gas.

Ok, what does that mean? P10 is a 10% certainty is this reserve actually being in place. Now should this be factored down for "potential P10" I'm not sure.

So what would all this be worth?

Scenario 1 - Oil only.

From what I have read $10/barrel is a reasonable value for in ground resources. I assume taxation will be pretty favourable in Kenya, but there is the cost and risk of the requirement for new infrastructure in the region. So, just to get a number, I'll reduce the $10 to $5.

So, 25% on 3.6bbl is 0.9bbl. at $5 per barrel thats... wait for it.. $4.5B in USD. Don't get too excited yet though.

Scenario 2 - Oil and gas.

So the oil only calculated as before works out as $1.9B in USD. I have seen $1.50 USD / MCF (thousand cubic feet) as a lower bound value for in ground gas. Halving this again for various risks... gives a total value of $3M USD. And a grant total of about US$2B.

I like scenario 2, seems a reasonable number and one I can swallow.

So, whats PCL worth right now. AU$20M, with about 600M shares on issue.

Applying all of the value from scenario 2 would give a MC of something like AU$2.2B. Thats a decent whack and about $3.60/share.

So looking at risk versus reward PCL is looking pretty good, something like 10:1.

The problem is, who has $2.2B lying around to buy PCL's possible assets and who else would they be in competition with? I mean, Woodside only have a MC of AU3.1B with their many developed assets, and Origin AU$1.4B.

Now without much science, I could see a company like PCL having a MC around the $600m mark quite happily, but something tells me that any more than that is unlikely.

Anyone know of any precedents out there of microcap explorers getting taken out for vast sums of money? On market takeovers re pretty hard to manage, so I doubt the current SP would be an indicator to what any suitor would pay.

Whats more, this is just Kenya L8. By holding PCL you are already hedging yourself with their multiple projects.