For those that are not aware, there is an article on St#$@head summarising the FMDP. Yes it is a paid article, does not have any new material but does reach a good number of readers/ investors in the small cap space so puts a few more eyeball onto BRK.
As the FMDP project is underway with the spudding of the first well, I thought it might be a good idea to discuss the significance of the project and add some context.
We know that the SWISH project booked 11.9 million BOE of NET reserves to BRK's account. Net in this case is after royalties and attributable to the BRK working interest. BRK have reported that the FMDP will cost US40 million to develop , of which US$26 million will be BRK's share. That implies an expected BRK WI in the development of 26/40 or 65%. The final WI is subject to pooling which may increase the end WI ( and therefore also the cost to BRK).
BRK have also stated the development will produce a net 715,000 BOE over a 12 month period from startup at ~2000 BOEPD average over the 12 month period.
There is a lot of information here but some of what is missing is information relating to the SCALE of the FMDP relative to the rest of the SWISH asset. This would give some insight into what the future developments of the whole of the SWISH asset may involve. It would be very helpful to know what percentage of the total SWISH reserve was attributable to the FMDP. Turns out the development involves ~17% of the total SWISH reserve. ( confirmed with an answer on the investor hub)
So what can we glean from that.
1) The FMDP will develop ~17% of 11.9 MMBOE or ~2.023 MMBOE net reserves to BRK. This means there are another ~9.9 MMBOE of net reserve to develop.
2) The gross reserves to be developed for the project at a 100% WI with the average royalty rate of 20% are 2.023 million BOE / (0.65 x 0.8) = ~3.89 million BOE. That means the total gross reserve being developed at SWISH by BRK as the operator is ~3.89 MMBOE/0.17 = ~22.9 million BOE, of which another ~19 MMBOE will be developed in the other 3 DSU's.
Please note, the 11.9 MMBOE is conservative as that did not include the extra reserves in BRUINS that will be picked up when the 320 added acres to that DSU will be pooled. This should increase reserves in the Woodford at Bruins by ~ 0.8 MMBOE net to BRK.
Essentially, it can be said BRK are developing an oil and gas field that contains almost 23 million BOE in reserves, of which over 50% are liquids.
The field development costs will be US$ 40 million to drain ~3.9 million BOE, or ~US$10.25 per BOE.
We know the cash costs of current production is ~US$10 per BOE as from the BRK Noosa presentation in November 2023
View attachment 5980065So we can conclude all in cash costs are ~US$ 20 per BOE... these numbers will only be " ball park correct" but show that the FMDP will make a very good cash return ( before depreciation ). This is important as 2 of the 4 wells in the development will have the shortest lateral sections ( 5000 ft), which means the per foot well drilling cost for the project will almost certainly be the highest of all the SWISH DSU developments. The longer lateral wells will develop more barrels per well so the BOE development cost should be less than for the FMDP.
One can look at what BRK are embarking on is the staged development of a significant ~23 MMBOE oil and gas field.
They are operating the project with a small but experienced team.
Their balance sheet allows them to fund the development internally, firstly with cash on hand and current cashflow, and then from the resultant significantly boosted project cashflow.
The time from initial development of each stage to production is measured in months, not years.
The regulatory jurisdiction they operate in is fully supportive of oil and gas, as are the lease holders on whose land they operate.
Their three streams of product are immediately saleable and infrastructure is such that oil refineries , gas pipelines and processing plants are littered around their operations.
Once the SWISH asset is fully developed, ( 2-3 years time, my estimate) BRK will be in the top 5-6 ASX listed oil and gas producers with little or no debt, significant production and cashflow which will decline from the peak, but will base at a level where decline will be low ( single digit) throwing off significant, sustainable cashflow. Along the way we will see step change increases in production and cashflow as each DSU is rapidly developed with back to back drilling and completion.
That is the operational " forecast".... the share price/ market cap forecast is anyone"s guess.
cheers
Dan