Ann: Brookside, Financially Disciplined Oil Price Leverage, page-27

Interesting, very little discussion/ dissection of the new information contained within this presentation.

As @nashezz says, highlights how undervalued BRK are at this point in time.

Some points to consider.

1) Valuation.



The above slide shows BRK's current EV ( Enterprise Valuation... MC -Cash+ debt) of $36.5  million is roughly equivalent to 14% of the SWISH acreage reserve NPV discounted to 10%. People rightly argue that the valuation which was calculated on the 2022 average price of oil of US$ 93.67 vs ~US80 now, and average  gas  price of US$6.36 vs US$2.8 now  will be overstated at current prices. So if we were to guestimate and  decrease the NPV of the 11.9 MMBOE reserve to AUD $150 million to accommodate the fall in commodity prices,  BRK would still be trading at 24% of the  NPV10 value with the current $36 million EV .... still av very steep discount.

But, the NPV being a reserve value calculation excludes certain " facts" as again highlighted by the presentation.


BRK are in the process of pooling the Bruins unit which will increase their acreage in that unit from 45% to ~80 %. ( This is only in the Woodford formation as the Sycamore formation has been too heavily drilled by historic vertical wells which would make leasing that formation too complex and expensive).  The proceedings will be in court over 3 days this week which will hopefully result in an order to proceed with the forming the DSU, pooling, well spacing exemptions etc. Still can be continued to later dates but BRK will win operatorship In addition the Marrons Unit,( the Sycamore formation DSU over the Flames Woodford)  is also close to finalisation for pooling. As shown by the above graph, this will add at least 2.1 million BOE in reserves to BRK, effectively without  doing anything more than the stroke of a few judges pens.

In addition,  as we all know now, if BRK decide to stay in the acreage to participate in their development, they will not drill one well every 3 months over 5-6 years, but form drilling partnerships and JV's , which will batch drill and complete the wells concurrently, and in a closer well density. Data from the CLR Courbett full field plan will help quantify the potential increase in field EUR as a result. By drilling and completing concurrently, thereby eliminating frack hit issues  that new child wells have on existing/ producing parent wells, operators are able to drill in tighter spacings, drain more of the reserves at higher rates  . Increasing  a well count by 1 in a DSU that was originally planning to have 7 wells effectively increases reserve and production capacity by ~14 %.  We may find at least another ~2 million+ BOE of reserves will be attributable to BRK by this measure alone which will see the 11.9 MMBOE reserve approach 16 MMBOE. ( after pooling)



This implies ~4.1 million extra BOE reserves or an increase ~34% increase in the NPV. If we assume the $150 million for 11.9 MMBOE  ( or whatever number you may want to base the current NPV off) then 16MMBOE would be ~$200 million at current prices.



The graph shows a hypothetical increase in reserve due to Bradbury, but until we get some data are per the Juanita well, and some insight as to the AOI potential, it is not practical to guestimate any value for that project at this time.


2) Show me the money.


Each presentation should have the money slide




This graph is vey useful for determining what BRK receive per BOE produced individually and as the 3 stream mixture.

This show how profitable the SWISH stream is and includes breakdown for severance taxes, transport/ marketing and LOE ( lease operating expenses).

a) Severance taxes  are 5% of gross receipts for the first 2 years of well production , and 7% thereafter.

So at US$54.5 per BOE, this tax is  US$2.73 at this stage.

b) LOE for the quarterly was US$3.96 per BOE

c) So transport and marketing will be  ( 9.7-2.73-3.96) ~US$3 per BOE.

Even when the wells decline, severance tax is price based, not production based...transport costs are prominently volume independent, the less volume , the less oil truck free, the less gas fees... LOE is  closer to a fixed cost  as it is a recurring cost related to operating the wells and running the field equipment, so that will rise as production falls.

If we double the LOE costs as wells decline to their logarithmic production decline of ~5% per annum after 4-5 years ( from where they produce for another 15-20+ year) , total production costs of ~$15 per BOE ( todays prices)  of a stream which will still be 40-50% liquids over the economic life of the well , SWISH will still make a very good , high margin annuity style income stream for a long time.


3) FORWARD  PLAN





Points 2 and 3 seem to indicate a more production bias to  monetisation, which is not surprising considering the wealth of new data which is coming indicating superior production rates, increased reserves  per DSU's and higher  IRR's  than originally factored in by BRK before they drilled their own wells.

Lets see what happens over the next few months as the monetisation process proceeds.  Won't be surprised to see BRK a top 5 SX producer over the next 2 years behind WPL, STO, BPT, KAR and just ahead of HZN

Cheers

Dan