88e Long Term Investors Group - Iceing on Cake

Whatnonewsyet posted on LSE :

"We have had many sp projections recently based on various billion barrels of reserves, I appreciate this is all good humoured stuff but the potential is clearly there. I am keen to know if any have accounted for the sliding scale of what Burgundy get as more recoverable oil is established. If I am not mistaken Tim0's calculator accounts for this. My question however is whether the formula applies to both unconventional and conventional? Perhaps Tim could give us a range of outcomes based on total reserves having applied the formula. Any feedback welcome. "

Hi Whatnonewsyet,

That's right The Magic Calculator did factor in the Net Profit Interest (NPI) based on the Multiple Of Invested Capital (MOIC). The soure of this information can be found in the original Tangiers Prospectus which is publically available on ASX the Australian Stock Exchange website.

http://clients2.weblink.com.au/clients/TangiersPetroleum/article.asp?asx=TPT&view=6710019.

If that gets deleted then you can find it by googling it.

Section 14.5 "Material Contracts" says "The NPI applies to any interest sold by Energy Alaska, other than through a farm out."

So "Any Interest" means lease area, oil conventional or unconventional, mineral.

I have yet to include conventional in The Magic Calculator as I need to know operational costs but if we assume it is the same as unconventional we would be close so simply add the resource estimates and you will get a clue.

I will put it on the website as soon as Aberdeenman gets the wiki bit operational, which wont be long, he should be back from lazing around on a deck chair soon.

In the mean time the conclusions were:

For oil price $60 at the Mean of P10, P50 and P90 resource estimates (2.6 billion barrels) we could see 24p at buyout

or:

POO => Buyout SP
$60 => 24p
$70 => 42p
$80 => 60p

If you look at the more optimistic end P10 = 3.8 billion barrels unconventional we get:

POO => Buyout SP
$60 => 35p
$70 => 61p
$80 => 88p

ok I rounded that last figure a bit it was 87.7p but you get the idea.

So to consider how conventional might affect our retirement beer and or gin and tonic fund then:

If we add the Gross Mean 758 million barrels conventional then simply by proportion to the Mean 2.6 billion barrels unconventional

at POO= $70 we get 42p*(2.6+0.78)/2.6 = 54p ie its around 30% more. Thats quite a lot of iceing, but we need to have a closer look at that quick and dirty scale.

Do you own research, dont believe me, but it does cross check nicely with Dave Walls 30p to 60p or the Paul Basinski's own estimates.

MickeyMasters has an alternative way of looking at the eventual buyout based on looking at comparable land values.

Good luck, Tim

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