Good question BrettK, A proponents of a prospect will usually...

Good question BrettK,

A proponents of a prospect will usually quote their “geological chance of success”. This is simply the chance of finding movable hydrocarbons in the well. It says nothing about the size or commerciality of the find. 20% sounds about right for Welchau, although I haven’t been able to locate any source, I’ve been working on about 20-30% myself.

If they do have a geological success, which is a 1 in 5 chance at 20%, they’re then saying the P50 for Welchau is 807Bcf. In other words, if they find hydrocarbons, there’s a 50% chance its more than 807Bcf and a 50% chance its less. There’s a chance they find hydrocarbons (ie. Have “success”) but its in small quantities or poor quality reservoir and you never have a commercial development.

807Bcf is undoubtedly a big resource for a company of ADX size, however the next question is reservoir quality, even if they find a large resource it could be costly to develop if its in a tight or complex reservoir. The Molln 3.3MMscf/d is respectable enough for an onshore resource, but its not big, wells in the Perth basin for example have recently been doing more than 10-20x this on test. So my base assumption is the development will be economic but not crazy economic because it will require more wells and potentially fracture stimulation.

Hope that helps somewhat. I’m in ADX for Welchau, however the backstop of Anshof and an excellent acreage position (relative to market cap) makes this a more secure bet at the current share price than someone with their business staked on one exploration well.