It seems GenYstarTrader post has received a lot of attention - I do enjoy reading longer contributing posts that encourage debate so well done GYST. However I do want to rebut and draw attention to a couple of things:
1. MEO will not be free carried to production! MEO is seeking to be free carried only for the first exploration well. Even if it goes perfectly and wirelogging etc indicate the 20Tcf of gas hoped for is indeed present and recoverable, then several production wells would need to be drilled along with infrastructure to take the gas to the likely Pluto/Wheatstone trains. If MEO retains a 20% share in Artemis it will need to pay 20% of these costs – or further farm down its stake.
2. You have to remember the revenues will be staggered over 20 years (or more). The NPV of such a resource, once you factor in a 10% discount rate, royalties and tax is a fraction of the figure you quote. All told a NPV of 4b (assuming a 12Tcf recoverable find lol) is more realistic imo. Allowing for capital raising to fund MEOs share of production costs I’d say a SP of around $6 upon production – from 2014 onwards – would be a possibility.
3. Discounting this $6 SP at 15% back to today and assuming a 32% CoS, Artemis could now be ‘worth’ a $1 to MEO. Interestingly this is a similar figure to that I (and others no doubt) derived from assessing MEOs 20% share of 2P of 12Tcf at 60c/GJ risked at 32%.
4. So still lots of upside from here!
MEO Price at posting:
51.5¢ Sentiment: Buy Disclosure: Held
