88E Broker Notes, page-30

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spinefx

9,331 Posts.

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19/02/21

15:18

Post #: 51161890
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Originally posted by usernam ↑

A few interesting extracts from the Centos Securities 12th Feb update. Bolding is mine

"We update our model following the placing, setting our target price at 2.5p, approx. 5x the current share price"
(This is their target for the current share price, not the price on success which is given below)

"Targeting >0.5bnbbls of net mean prospective resources at a combined net cost of cUS$6.9m, we suggest that no drilling campaign in 2021 gives investors quite so much “bang for its buck”

"As such, 88 Energy’s business model means that it is not overly reliant on a single well or a single project, providing shareholders with some degree of downside protection in the event of a disappointing result at one of the Company’s projects. For example, at Project Peregrine, the Merlin and Harrier prospects make up just 16% and 1%, respectively of our overall risked valuation. This is in stark contrast to 88 Energy’s peers, where a single well contributes c60-70% of the overall valuation"

The success value for Merlin is given as 5.7 pence which converts to 10 cents AUD (11 fold upside from current 0.9 cents)
The success value for Harrier (combined from Table 1 - see below) is 3.3 p which converts to 5.9 cents (6.5 fold upside)

On the negative side, are the low chances of success given in Table 1 (4-7% for Merlin and Harrier). Also Centos has close ties to 88E as shown in the Legend at the end of their report.

Nonetheless it still seems - to me - a reasonable small punt given the upside multiples possible with the upcoming well (which only makes up about 1/6th of their portfolio), the nearology of Willow ($US 5 billion dollar project / possibility of 100,000 barrels of oil/day / approx 35 km away), Umiat to the south, and Pantheon showing some success close to 88E ground.

88E haven't had that much luck thus far, and the odds, as given by Centos, point to that continuing for the next well. However, there have been multiple discoveries in this region so you never know.

Expand

usernam,

Anyone that is investing in 88e, should in my view, not be doing so based on any Cenkos report.

Cenkos are 88e's UK based company advisors, their job is to pump the tyres. Not once has a Cenkos prediction come close to reality.

For Cenkos to state,

"As such, 88 Energy’s business model means that it is not overly reliant on a single well or a single project, providing shareholders with some degree of downside protection in the event of a disappointing result at one of the Company’s projects. For example, at Project Peregrine, the Merlin and Harrier prospects make up just 16% and 1%, respectively of our overall risked valuation. This is in stark contrast to 88 Energy’s peers, where a single well contributes c60-70% of the overall valuation"

Is disingenuous at best. Drilling is a binary play, strike oil, great news, miss oil, share price gets dumped. There will be very little in the way of downside protection if Merlin(and possibly Harrier) come up empty.

Just check the share price reactions to previous drill results.

Just my thoughts.

Happy Friday

Cheers and beers

88E Price at posting: 1.0¢ Sentiment: Buy Disclosure: Held
10 Upvote

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