meo valuation, page-14

Hello everyone

Thanks for the appreciation.

I would like to follow up my post by saying that I have no ulterior motive in participating in the HC forum other than clarifying information that is already out there, to the best of my ability. If my posts are seen as anything different then so be it, I can live with that.

I don't think Hot Copper has a major influence over the market as a whole but I do think it is a good place for those participating in the forum to bounce ideas off each other. I don't see it as a place for antagonism, a means to take advantage of others or just to feed the ego. On the other hand, I suppose, being a microcosm of life an anonymous forum will always mimic the multiplicity of human nature.

I do hold MEO shares but my sentiment has always been LT Buy. The majority of shares I have held for some time now but I must admit that I have rotated a small %ge as working capital and to average down. Notwithstanding that, like everyone else, I have felt the strain of holding a volatile stock, especially when it is traded down.

Of course I would like the SP to rise but my confidence in the stock says to me that this is inevitable. But that is only my opinion. MEO have always been transparent in their releases and is one company that gives their SHs sufficient information, when possible (outside confidentiality clauses), to keep them up to date. Of course MEO management are bullish about their company, with good reason in my eyes, and they are doing a good job. I did temper this though by putting forward conservative factors when reaching my valuation.

Over the time I have held MEO shares I have seen the ups and downs of the stock. I could always see the MEO's strength which gave me confidence in holding. This strength and high retail base is also what makes it attractive to traders and is open to manipulation. Whilst I don't agree with the uneven playing field that is given to high frequency traders the volatility of the any stock is part of the market system.

So the reason in giving the risked value of MEO is to try and help new holders, or those thinking to buy, guage the value of the company. Of course the risked value could be zero or 100% but that is over-simplifying the task. The company are proactive in spending millions on seismic scans and interpretation to lessen the risk. The potential farmin partners (and MEO had up to 20 in the Artemis data room) use this data to base their decision on whether or not to farm into a permit.

Petrobras are a cashed up company and have put $39m up front to farm into WA-360-P. With PBRs experience this would be an educated gamble and if there is gas then it means they will compensate MEO to the tune of >$200m for their 50% share in the venture. I don't think they would part with that money on a 0% risk.

But my other reason for doing the valuation was to show that MEO is not just Artemis. If we take Artemis out of the equation the potential (risked?) vps is $2.45. If we look at SeamFiends (thanks for that) figures, without Artemis:

$7.14-$3.26
We get an unrisked VPS of $3.88

Management will de-risk Artemis with the Heron farm-out and other ventures indicated in the open briefing.

So we know that MEO is high risk and is a trader's share. We also know from the charts (thanks onetonne) that history does appear to repeat itself. We do know that as we enter this new uptrend that there will be no internal adverse effects on the SP going into the spud of A#1. By that I mean all the housekeeping has been done such as the Doravale dissolution and we will not have any CR exercises that affected the SP leading up to Heron and helped in the downturn after the non-announcement last year.

As the SP rises there will be profit taking, which is fine. The BESBS players will make their move but all I am saying to newbies is not to be drawn into a sense of panic by the manipulators. If you want to trade then all you have to do is be patient and keep on the positive side of your trades, and watch they don't get your negative stop losses too easily. We have charts (of which we can thank plenty of skilled MEOmite participants) to help us and the stacking of the sell/buy market depth can show us when a movement is on the cards.

We are even still in the range (48c) that by buying now we can maybe sell half and free-carry the rest over the drilling of A#1 if we reach the dollar mark (when we get there rallypoint). Those who bought in the 25-30s are almost at that point now (some may already be in that position).

Whatever decisions you make they are yours to make. It is always a pity to see smaller traders being swallowed up by the sharks. We must do our own research, whilst taking note of other's comments, making sure to filter the wheat from the chaff. Make a plan and stick to it. Part of that plan must be to be flexible to allow for all eventualities.

MEO has the habit of locking investors in. For those that are in that position, the lean times will soon be over IMO.

Good luck all.

#:>))

PS: I think Jurgen answered your question in his Open Briefing interview about Heron:

There are three fundamental factors: the first is the size of the resource. Our estimated range of Prospective Resource (3.7 to 6.6 Tcf with a Best Estimate of 5.0 Tcf) is certainly sufficient for an LNG development which requires a minimum of 3 Tcf.

If the 55% recovery factor was still be taken into account the best estimate would be <3Tcf.

It all looks good to me:)