Thanks Mandurah,
I have updated to have Hardman Resources at 20% of the field.
Some other points to note - thank you loads to Cath for her valuable contributions emailed to me overnight;
1. Recoverable versus oil in place volumes
The PRMS (Petroleum Resource Management System) that has been adopted in Australia and slowly around the world at the recommendation of the SPE (Society of Petroleum Engineers) is the resources/reserves reporting system that the ASX mandates oil and gas companies report under. This all sounds like a mouthful but in short, we cannot release oil in place volumes when quoting our prospective or contingent resources. So, our Best Estimate (P50), High Estimate (P10) or Low Estimate (P90) resources are ALWAYS recoverable. This applies to prospective (undiscovered) or contingent (discovered) resources.
2. FAR's reporting of volumes in FAN-1 and SNE-1
When we reported the FAN-1 and SNE-1 discoveries, you will probably have noticed that we did not report a volume (contingent resource) for FAN-1 but did so for SNE-1. The reason for this is that we have not yet finalised our evaluation of the reservoir rocks in the FAN-1 well - it is quite complex and we are looking at numerous oil columns in the well (this is evidenced by the fact that we sampled many different oils - hence the range of API's). Cairn Energy is not bound by the same reporting standards in the UK so they did release oil in place estimates (STOOIP). The P50 STOOIP reported by Cairn was 950mmbbls. If, for example, you apply an average recovery factor of 30% (fair assumption at this stage), then you would assume a rough recoverable resource (equivalent to a best estimate contingent resource under PRMS) of around 300mmbbls. In contrast, in SNE-1, we saw an excellent reservoir sand and a single oil column. Although the evaluation of the core is yet to take place, our preliminary estimate of the contingent resource on a best estimate basis is 330mmbbls.
630mmbbls recoverable is nothing short of an outstanding result for our drilling program and especially for the first two wells drilled in the basin! FAR's net 15% is certainly very meaningful.
(Please refer to the cautionary statements in our announcements related to the quoting of prospective and contingent resources).
In short, you using 100% recoverability for the P50's is correct but for the wrong reason.
3. NPV's per barrel
FAR has undertaken some preliminary modelling of the discounted cash flow (DCF) for a typical development over FAN-1 (based on a Jubilee style development OPEX - operational expenditure and CAPEX - capital expenditure) and taking into consideration the PSC (Production Sharing Contract) terms that we have in Senegal. The estimated NPV/bbl for FAN-1 is USD9. We have not completed the exercise as yet as we have not decided on a development configuration for SNE-1 but it will be cheaper OPEX and CAPEX and because it is a better reservoir the NPV/bbl should be higher.
I don’t recommend multiplying out the NPV/bbl by the number of FAR barrels at this stage (although it is not unfair to do so) as most of the analysts will apply a risk factor to the successful appraisal of the discoveries. This seems unfair as the discovery is already risked (by definition in the P10-P90 calculations) but it is the way of the world at the moment, particularly in a very risk averse and bearish market. So, the value is generally having a 30-40% risk factor applied.
Updates to the table
1. SNE-1 is now at PRMS P50 standard - i.e it is assuming recoverability. FAN-1, I will put at 30% .
2. I have been using NPV of $10 for FAN-1 which is inline with the calcs within FAR. For SNE-1 I will use $15.
3. Whilst analysts use a risk factor over the top, I also believe this is unfair so will leave out.
4. I have changed Hardman to be 20% of the Chinguetti field - thank you Hardmano.
Thank you for all the inputs, especially to Cath
replying on a weekend.
Thank you also to the baiters and trolls - am I correct in that we haven't seen any trolls on FAR for 24 hours?
(20min delay)