re: Ann: Nido Secures Dragon Oil as Farmin Pa...
Couple of things carrying on from that last post.
On BRR Phil mentions a WI in SC63 of 20 to 25%. That may leave the door open to negotiation with PNOC for 15% instead of 10%. If that occurred, the final JVP WI would be Dragon 50%, with NDO and PNOC on 25% each...a not unreasonable arrangement which I don't think PNOC would be averse to...we'll see.
If NDO drilled Baragatan on a 50% basis (compared to a 20% basis) and it was dry, that would be US$10M down the drain (US$2M on 20%) on a single PSC.
Deploy that US$10M to take up a further 10% in three other PSC's elsewhere is certainly spreading the risk much better.
However, let's look at what we get financially on a well program basis for moving that US$10M to other objectives.
As mentioned in my other post, NDO entitlement of 75.5mmbbls (best case success) on 50% Baragatan slips to 30.2mmbbls after the Dragon deal...a loss of 45.3mmbbls entitlement...COS 34%.
What we get for that US$10M in Indo.
This is not exactly how it is because in the Baronang and Gurita PSC's we had to pay a disproportionate amount of the drilling cost of the first well to earn our 10% WI (ie, more than 10% of the cost)...wonder if that disproportionate amount also applies to the 2nd 10%.
In the Cakalang PSC it's a straight 10%.
For this purpose let's just say that the US$10M NDO have already paid to Lundin covers NDO's drilling costs for Balqis, Boni and Gobi. They then pay a further US$10M to get 20% WI.
Prospective resource estimates for the 3 Indo wells are.. Balqis - 47mmbbls (10% = 4.7mmbbls) COS 26% Boni - 55mmbbls (10% = 5.5mmbbls) COS 7% Gobi - 24mmbbls (10% = 2.4mmbbls) COS unknown
So on a cumulative basis for these 3 wells, for an extra US$10M NDO can achieve another 12.6mmbbls in prospective resources, but they gave up 45.3mmbbls of prospective resource on Baragatan to achieve this.
Financially, it most certainly doesn't add up, but on a risk mitigation basis only, it does...we go from a 1 in 1 chance to a 3 in 3.
Of course if there is anymore to pay on these 3 Indo wells on top of what I have already mentioned, the deal will be worse.
This is only a rough guide and imo because the Indo deal and just what the payments cover are very murky waters...as explained to us at least.
Comments welcome.
NDO Price at posting:
3.3¢ Sentiment: Buy Disclosure: Held
