Ann: SM71 F4 Well Update, page-5

We all know that the shit is hitting the fan. While not diminishing the seriousness of the current situation I note that Qld Uni has identified two currently available drugs that they say definitely cure the disease, so perhaps things are not quite as bad as people might think.
The question is when, how quickly and to what extent things will turn around, as they most assuredly will.
Supply can be ramped down as well as up, and as we saw last Monday markets can change very quickly, especially the oil market. It will be interesting to see how KSA and Russia act over the next few months.

As far as future demand goes there is a huge domestic Chinese market which, on the face of it, seems likely to recover before anything else. If the curative drugs get distributed quickly worldwide then the fallout may be nowhere near as bad as it otherwise might be. Who knows?

Anyway, further to my BYE prognosis post from yesterday I offer the following pearls from inner sanctum.

SM71:
Currently there are 4 producing wells in SM71.
The most recent producing well - F4 - is currently draining the gas cap as announced. Once drained of gas the oil flow rate at F4 is anticipated to be in line with the other 3 wells of around 1,000bpd for each well.
F5 is expected to be similar again i.e. around 1,000bpd. (I realise that BYE doesn't get it all but we're doing rough numbers here)

So in a couple of months' time oil Production from SM71 should be around 5,000bpd from 5 wells.

SM58:
Anticipated to be commissioned in July, SM58 has 8 slots. The G1 well will be drilled straight away. It is a large resource. The anticipated flow rate can be assumed to be at least 1,000bpd.
In addition they will certainly be drilling a second well on SM58 in the 3rd quarter.
They will drill an additional two wells at that time if the oil price is reasonable. If the oil price is down then they may decide to wait before they drill the other two.

Based upon this analysis there will be a minimum of 7 producing wells in the 3rd quarter with production that can be assumed to be at least 7,000bpd. As they are planning to drill two more wells it is likely there will be a total of 9 wells producing in Q3 or early Q4, but they may choose to delay the last two if the oil price is low.

If there are 9 wells we are looking at an expected minimum production rate of 9,000bpd. Given the size of the reserve and the capacity of the rig at SM58 that flow rate may be substantially higher.

If we take the conservative estimate of 7,000bpd and a WTI oil price around US$32 that provides clear cash of US$25 per barrel then:
we are looking at revenues of $25 x 7,000 = US$175,000 per day ~US$64mpa ~A$100mpa.

While acknowledging that nothing is certain and that we live in interesting times a comfortable, highly probable, sustainable, clear cash flow of A$100mpa in 6 months time makes the current A$122m market cap look very cheap to me.

There is a very good chance production will be higher and there will remain ~25 qualified targets ready to drill.