2.6 million barrels of oil free - good deal

Firstly, an extract from AWE at:

http://www.awexp.com.au/irm/ShowStaticCategory.aspx?CategoryID=207&HideTopLine=True

BassGas project
AWE Equity: 42.5%
Location:
T/L 1 and T/RL 1, offshore Bass Basin, Tasmania
Joint Venture:
Origin Energy 42.5%
Cal Energy 15.0%

Initial Discovery:
Yolla-1 drilled in 1985
Development Schedule:
Project Approval 1999
First Gas Produced 2007
Development Cost: A$ 750 million
Current Production: The project has achieved its design gas throughput rates of 65 Terajoules per day, with budgeted liquid recoveries.
Brief description:

The BassGas project consists of an offshore, unmanned wellhead platform connected by pipeline to the gas processing facility at Lang Lang.

Gas is currently produced from two wells, Yolla-3 and Yolla-4. The offshore facilities have been designed to incorporate additional production wells from the Yolla field and also to tie-in other gas discoveries in the region.

A 2-well drilling programme (Trefoil-2 and Rockhopper-1) is expected to start in September 2009

Ultimate Recoverable Reserves (2P):
333 Petajoules of gas.
28 million barrels of liquids, in the form of LPG and condensate

Followed by an extract from CalEnergy:

http://www.calenergy.com/projects6.aspx

"The initial operator estimates suggest the field contains recoverable reserves of approximately 323 PJ of sales gas, 13 million barrels of condensate and 0.97 million tonnes of LPG. In addition, there are two oil sands which will be developed at a later stage.

To date, the field has produced approximately 46 PJ of sales gas, 2 million barrels of condensate and 100 kilo tonnes of LPG."

and

CalEnergy has a 15 percent interest in the Yolla gas field and associated pipeline to the onshore processing plant at Lang Lang in Victoria. Collectively, the Yolla gas field and associated production/export infrastructure is known as the BassGas Project.

The Yolla gas field, located approximately 120 kilometers south of the coastline of Victoria, was discovered in 1985 by Amoco and was considered uncommercial at that time.

In 1998, CalEnergy and its joint venture partners drilled the Yolla No. 2 appraisal well. The results proved there were sufficient reserves of gas, condensate and oil to support commercial development. This resulted in the BassGas Project, which required the construction of an offshore platform, two deviated development wells, a 120km long export pipeline to shore, and an onshore gas and liquids processing plant at Lang Lang. Gas from the processing plant feeds into the Victorian natural gas grid. Condensate and LPG are separated from the gas stream for onshipping to the Geelong oil refinery and the local market, respectively.

So:

INP has purchased 7.5% of infrastructure that originally cost A$750 million for A$40 million (A$56 million in 2006 dollars) plus the development time cost to which must be added the value of oil/gas in place, cash flow, two oil sands which will be developed at a later stage, additional income from the Trefoil and Rockhopper exploration well project;Rockhopper will test the same structure as Aroo No. 1, to confirm the presence of missed pay recently identified on electric logs(I originally thought Rockhopper was a greenfield exploration well - but, not so) and possibly a third well as outlined in a recent report by NZO who are awaiting release of the semi-submersible drilling rig Kan Tan IV from Bass Straight.

No doubt the fact that INP and AWE have the same Director on their boards has helped this situation tremendously; otherwise, how could a junior like IPM get this fantastic opportunity? 2.6 million barrels of oil for zilch after deducting A$56M of infrastructure, all bought for less than A$40M. WOW! What a deal...can someone point out where my rose tinted glasses have led me astray?

Add to all the above the coal seam gas venture with AGL and the immediate future looks bright.