For those interested, below I have pasted a copy of a letter that I sent to a friend for query last night, it contains relevant data for quick reference at the base of the post, as well as self-explanatory (spec.) reward tables. The intention of this post is to simply assist fellow members in short-cutting fundamental & spec. research with CUE & to highlight variable rewards. This may be by no means necessarily accurate so please do your own research, &/or adjust reward tables accordingly, (nb- my personal adjustment of %21.4 of upper case reward that reflects my personal tolerances/appetite). Although there may be considerable delay to any response of mine, would be interested in valid critique/conversation.
Andalisa, a short note to you to say many thanks,(fanks!), for your initial calcs in the early stages of the market embrace for this variable, (plus %86 in three weeks from that time of notification), & your attempt to bring that awareness up to fellow members. It was appreciated by no doubt many, well done to standing your ground, & if you're not aware, you at least have my grattitude & respect ... Bravo!
Warm regards to all & good luck!
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From:## To: ## Subject: CUE - Speculation ... Date: Tue, 09 Nov 2004 18:24:57 +0000
Good morning ##, As discussed, I have done some quick calculations based on the variable value impact to CUE in relation to STO's Jeruk 2 discovery, allowing for the possibility that preliminary testing results may lead to an indication, (perceived or otherwise), that the field may contain in excess of 169mmboe (target) ... The catalyst for this e-mail being the 'rife rumours' of the discovery being possibly up to 300% larger than expected, ie 510mmboe, & the request for serious corrections on any flawed speculative summation/deductions that may be evident in my reasoning ... I will speak to you in the morning to discuss further ...
*Rumor is rife that Santos will announce further details on the Jeruk 2 well in Indonesia (Santos 50 pct) tomorrow - and that it will be over a half billion barrels rather than the 170 million barrels that were being suggested earlier. STO up 20c to $8.36 on 1.67m shares. CUE is at 20.5c, steady on the day on 4.2m shares - has come from 7c after the Jeruk announcement. Had declined to participate in drilling Jeruk 2 but can buy back into its 15 pct holding on payment of the usual penalties.'
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CUE Approx. 333,943,755 fpo @ 20.5cps = market capitalisation of A$68,458,470.- Related security to consider, CUEVA.NZ.
Prior to 18/10/04 - 333,943,755 @ 8cps = m/c of approx. A$26,715,500.- (STO ann relating to Jeruk 2 discovery).
STO's Jeruk 2 impact can thus far be assumed to be directly responsible for the market's recent speculative re-rating of CUE's present m/c value being 256.25% of m/c prior to 18/10/04, (A$41.743m increase).
nb- CUE recent 17 day's total volume = 241,202,000. Today's volume was 4,219,000 vs (*)14,811,000 or a 71.52% reduction on (*)prior 16 day average daily volume, (since discovery announcement) ... Traders muddy-ing waters still from left-over Fri/Mon rally so I take all volume/price action as not indicative to whether or not an announcement of this magnitude is expected. To be noted though was the reaction from Macquaries,(?), after the initial announcement from STO on the 18th at 1129hrs, & the timing of one minute from release to absorb the information & find leverage not in STO but CUE, (@1130hrs) resulting in the following rally ...
Query, any precedent that you're aware of for immediate takeover of a corelated entity after a substantial increase in asset recognition becomes legally declared to the market? ...
nb- Also any substantial increase in flow rates or field potential will see quick re-evaluations & upgrades from both 'Phat Prophets' & that broker from Singapore as well as interest from every other man & his dog in Australia so on the reward table listed below, might be prudent for early positioning despite any mild spec. premium ...
nb- {i}Spec. cost of re-entry for CUE @ A$33.4m equals less 10cps from reward table. {ii}Spec. cost of re-entry @ A$66.8m equals less 20cps from reward table. {ii}Spec. cost of re-entry @ A100m equals less 29.95cps from reward table.
nb- Personal momentum trade exit @ %21.4 of upper reward table, investment parcel requires re-assessment upon technical data.
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REWARD TABLE. a)Oil price of USD$48.2 x (1xUSD=1.32AUD) = AUD$63.624boe. (b)Oil price of USD$42.5 x (1xUSD=1.25AUD) = AUD$53.125boe. Calculations below are based on oil prices stated in (b) minus location minus time to production minus lower market prices minus production costs minus development wells equalling fair & reasonable initial 'laymans' market perception' of net present value to CUE of discovery using {i}A$10/boe and {ii}(A$15/boe). Calculations factoring 15% CUE ownership of field discovery multiplied by {i}oil price, ({ii}-multiplied by oil price) divided by capital structure of 334m shares to derive cps value.
**** From announcement; STO 1129hrs 18/10/04 EAST JAVA OIL DISCOVERY JERUK 2 ST-2.
18 October 2004 East Java oil discovery: Jeruk 2 ST-2 Santos Limited advises that oil and gas have flowed from its Jeruk 2 ST-2 well being drilled in the Sampang Production Sharing Contract, offshore East Java. An open-hole Drill Stem Test (DST) was performed in the well during Saturday 16th and Sunday 17th of October 2004. The test was performed over an 18 metre interval from 5,134m to 5,152m measured depth. Preliminary results from the DST are: • A flow rate of 7,488 barrels of oil (1,190 kilolitres) per day was recorded through a 1/2 inch (12.7 millimetre) surface choke accompanied by 2.21 million cubic feet (62.6 thousand cubic metres) per day of gas during a 5 1/2 hour flow period. • The flow rate was constrained by the throughput capacity of the surface production test facilities. • A flowing tubing head pressure of 2,762 pounds per square inch (19,043 kilopascals) was recorded. Following completion of the flow test the well was shut-in for measurement of pressure build-up, after which the testing equipment will be removed from the hole. Jeruk 2 will then be deepened in order to ascertain the full extent of the hydrocarbon column. Logs will be run when the well has reached total depth.
**** From announcement; CUE 1149hrs 19/10/04 FIRST QUARTER ACTIVITIES & CASHFLOW REPORTS.
Indonesia • The environmental plan and Plan of Development for the Oyong field have been approved by the Indonesian authorities. • Oyong reserves have increased following an independent assessment. • Early oil development in third quarter 2005 is now planned for Oyong. • Jeruk -2 tests oil subsequent to the end of the quarter.
DEVELOPMENT ACTIVITY Sampang PSC - Madura Strait, East Java, Indonesia (15% Interest) Operator: Santos Oyong Background The Oyong field was discovered in mid 2001 and has been delineated by a total of three wells. The oil and gas discovery is in 45 metres of water approximately 8 kilometres south of Madura Island and has a gas column of approximately 120 metres, underlain by a 38 metre oil column. On July 19, 2003 a Gas Sales Agreement was signed with PT Indonesia Power for the entire gas reserves of the Oyong field. The sale is denominated in US dollars. Reserves A reserves audit by DeGolyer and MacNaughton, an international expert, has resulted in an increase to previously assessed technically proven and probable oil reserves. The reserves (recoverable volumes) are characterized as technical reserves pending final joint venture approval of full development. The DeGolyer and MacNaughton reserves are: Proven (1P) Proven + Probable (2P) Proven + Probable + Possible (3P) Oil Oil in Place 80 99 131 Recoverable 6.4 9.9 15.7 Gas (including solution gas) Gas in place 143 169 183 Recoverable 107 135 147 Oyong Development The field environmental plan and plan of development have been approved by Indonesian authorities. As a result of the increase in Oyong field recoverable oil and the current high crude oil prices the joint venture is modifying the approved Oyong development plan to bring forward first oil production to third quarter 2005. The planned new development will consist of a simple well head structure formed by triangular braced surface well conductors which will extend above the sea surface. Development wells will be drilled through and between the conductors. Corp31Sept04.docC:\SharedData\Documents\2004-05\Finance\Quarterly Reports\Corp31Sept04.doc 3 Oil and gas will be processed on a nearby moored barge. Oil will be exported by shuttle tanker and gas will be sent by pipeline to the P.T. Indonesia electricity generating station at Grati, East Java. First gas is expected around mid 2006. Solution gas associated with the early oil production will be reinjected until gas production begins to Grati. Approval of Indonesian authorities will be required to revise the field plan of development and the environmental management plan. In addition, recent analysis of the Mundu Formation reservoir rock properties and consequent revised dynamic reservoir simulation modelling, have indicated that the peak oil production rate could reach 20,000 barrels of oil per day for a six well oil development and should average 9,000 barrels of oil per day for the first two years of production. A joint venture decision on development is expected prior to year end 2004. Oyong Funding The revised plan of development requires reduced capital expenditure with Cue's 15% share being reduced from US$19 million to US$14.5 million. The requirement for securitization of gas sales payments should also be reduced as the increased oil revenue due to higher proven reserves and increased oil prices are expected to substantially cover the cost of development. Negotiations on securitizing gas payments under the Gas Sales Agreement are continuing.
**** From announcement; CUE 1359hrs 25/10/04. JERUK OIL DISCOVERY.
Cue's co joint venturer and operator Santos Ltd has announced that the Jeruk -2 well on the Jeruk oil discovery in the Sampang PSC, offshore East Java, Indonesia, has flowed 7,488 barrels of oil per day on test. Cue had elected to not participate in the drilling of both the Jeruk -1 and Jeruk -2 wells and accordingly these wells were drilled on a sole risk basis by Santos (Sampang) Pty Ltd. However, Cue is entitled to reinstate its right to participate in any future development of the Jeruk discovery subject to the payment its 15% share of the cost of the two wells and the payment of a sole risk premium. Under the provisions of the Joint Operating Agreement for the Sampang PSC, which governs joint venture conduct with respect to the Jeruk -1 and -2 sole risk wells and the Jeruk discovery, Cue can reinstate its rights in the discovery by; 1. Paying its 15% share of the costs of the wells and, 2. paying a premium of 10 times its 15% share of the cost of the Jeruk -1 well and 5 times its 15% share of the costs of the Jeruk -2 well. The premium payable can be satisfied by Cue foregoing its share of production from a Jeruk development until the value of Cue's share of gross well head production reaches the total premium payable by Cue. Thereafter, Cue will receive its full 15% share of production. Cue's option to reinstate its right to participate in the development of the Jeruk discovery is triggered at the time of presentation to Cue of the formal plan of development for the field. Cue continues to retain its 15% equity in the remaining contract area outside the area of the Jeruk discovery. A large 3D seismic survey over a substantial portion of the block is planned to begin in late 2004. The survey is designed to follow up on the Jeruk discovery and to investigate several other prospects which are candidates for 2005 exploration drilling.
**** From announcement; CUE 0831hrs 01/11/04 NOTICE OF ANNUAL GENERAL MEETING.
4. Issue of New Capital To consider, and if thought fit, to pass the following as an ordinary resolution: "That in accordance with the provisions of clause 20 of the Company's Constitution and Listing Rule 7.3.1 of the Listing Rules of New Zealand Stock Exchange ("the Listing Rules"), the directors of the Company be authorised to place up to 100,000,000 ordinary shares in the capital of the Company each credited as fully paid with such placement to be made, in accordance with Listing rule 7.3.2 (b) of the Listing Rules, within 3 months from the date on which this resolution is passed and to be at an issue price per share of not less than 80% of the average market price for securities of that class as would be determined in relation to such an issue if made in accordance with the provisions of listing rule 7.3.3 of the listing rules of Australian Stock Exchange Limited."
**** From announcement; STO 1540hrs 04/10/04 WEEKLY DRILLING REPORT.
Delineation Wells (Near Field Exploration / Appraisal Wells) Jeruk 2/ST2 Type Oil Appraisal Location Offshore Indonesia Sampang PSC, East Java Basin. 1.6km E of Jeruk 1, 35km SW of the Oyong Field and some 40km SE of Surabaya. Status at 0400hrs 04/11/04 (Jakarta Time) Repairing BOPs prior to running wireline pressure logs. The current depth is 5507m (5043m True Vertical Depth) with no progress for the week. The well will be evaluated to establish the extent of the hydrocarbon column. Planned Total Depth 5700m (changed due to a revised well trajectory) Interest Santos Group 50% PT Medco Sampang 50%
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P.S.- Gold finished strong tonight, going to bed with a BIG %*&# smile!!
Warm regards ...
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CUE Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
(20min delay)