Bottom of the Barrel Valuation

Thought I'd a do a quick sanity check of what the absolute minimum valuation is for STX based on:

* SE2 and SE3 fails and the entire SE only containing 128PJ of 2P
* WE only has 422PJ of 2P with no upside
* Walyering only has 54PJ and 0.55 mm barrels of condensates with no upside

Conversion of PJ to BOe -> 1PJ = 0.94781 BCF = 0.158 mmBOe (1mmBOe = 6BCF)

So STX has an independently certified 2P reserve of 63.74mmBOe. Based on HPL's purchase of WGO, they paid 438mn for WGO's 33.3mn BOe, or 12.71/BOe. This implies a value of 810mn for STX's 2P, or 28.3cps. Accounting for STX's cash position, it's essentially 29cps. Note that since HPL's acquisition of WGO, gas price has risen from around 6 at the time to around 9.50 currently.

Basically, at current price level, this is what the market is pricing in just to spell it out clearly:

* The entire SE block only containing the SE1 discovery and the remaining SE block will contain no more gas
* No more gas to be found at Walyering
* ED1 and SWE1 will fail at WE, and no more gas to be found at WE
* OH, Arrino, Kadathinni and Eneabba Deep will contain no gas at all
* No domgas policy change

I should have done this exercise earlier, but I am definitely going to buy more come Monday. Even though I have ample liquidity and I am already up to my neck with STX shares, I won't go in just yet as there is no depth to the market's irrationality (same as there's no height to its irrational exuberance at times). But I will definitely be buying more because I just don't believe that we will not find another single PJ of gas in all of our tenements

618