BRK (ASX) BRK discussion

Originally posted by peto2810 ↑

As mentioned I have included some questions and responses David Prentice was gratuitous enough to give his time and attention to over the weekend, many thanks David

If you would not mind if I ask for the current approximate and average acreage prices US for STACK, SCOOP and SWISH areas so that I can run some basic market cap and valuation numbers that I would like to share on social forums? Also confirming the we currently have announced ~ 2100 acres within the Anadarko Basin (~2000 of which working interest) and ~480 acres secured within the SWISH play?

Acreage
Confirming (as per the Dec 31, 2018 Quarterly QAR) we currently have approximately 2,100 acres spread across the Anadarko Basin Plays. Broadly this is broken up as follows:-
STACK/SCOOP Working Interest Acres ~1,200 acres
SWISH (SCOOP) Working Interest Acres ~800 acres
Mineral Royalty Acres (STACK) ~100 acres
As we have set out in our ASX releases we are currently leasing in the SWISH AOI
(which covers roughly 35,000 acres) targeting a total of ~8,000 acres spread across ~7 development units (1,280 acre units). Average acreage prices are difficult to estimate because this covers a range of data points from what you may be able to lease undeveloped acreage for all the way through to what is paid for acreage that is on the cusp of being fully developed. This range is large, from as low as US$1,000 per acre (lower in some cases) to as high as US$25,000 per acre. I think you have probably seen the material from BOK that looked at A&D deals from mid-2015 to mid-2017 (attached) that showed a weighted
average for undeveloped acreage of ~US$16,000 per acre (this is now almost 12-months out of date).

View attachment 1091860

Is there a Brookside connection to Continental Resources Project Springboard in the Springer Shale Gas formation that appears to be within the announced SWISH region?

Continental Resources (NYSE:CRL) “SpringBoard” Project
The Phase 11 development that Continental describe in the slide from there latest Quarterly Earnings deck (attached) is a great summary of what we are targeting in SWISH (i.e. Woodford and Sycamore).
The exact location of our AOI is obviously commercially sensitive, but I can confirm
that CRL is developing and/or leasing in the area of our AOI and it is likely that we will participate in a well with them (in addition to the 8,000 acre “operated” position we are putting together).

View attachment 1091857

The market it would seem is either waiting for royalties received being booked or a possible sale in acreage for cash return in valuing the company and the current share price, if presenting to a sophisticated or institutional investor how would you refer to accretive growth in market valuation and investor return?

Market Catalysts
It always difficult to predict what will be the catalyst for further market recognition (outside of the obvious external factors, including the price of WTI).
From our perspective we remain focussed on reinforcing the message that BRK is all about $/Acre Valuation.
Ultimately this is the best way to measure our success now, on an on-going basis andfinally when we realize maximum value in an asset sale or take-out.
$/Acre moves up the curve from the lowest point (i.e. what you are able to negotiate in terms of upfront lease bonus per acre when you are initially acquiring undeveloped acreage) all the way up to the Net Present Value per acre which is based on the discounted cash flow estimated to flow from the oil and gas reserves per acre.
BRK will get re-rated at different times along this curve, as undeveloped acreage prices increase (as a result of competition, activity in the play and drilling and completion success), when trade-sale $/acre evidence emerges in the secondary market (i.e. the recent US$3.8bn Silver Run/Alta Mesa merger) and finally when larger E&P’s are looking to add low-risk Proven Reserves to their balance sheet and are prepared to pay something approaching the Net Present Value per acre.
The ultimate valuation multiple (NPV per acre) is a function of two things, the amount of reserves per acre and the economics of producing those reserves (break even costs and commodity pricing). NPV will increase with higher reserves, lower costs and
higher commodity prices.

It appears from Broker reports that there has been some selling down from larger institutions in the market, knowingly there could be many reasons for this occurring however could it be perceived that the previous question could be a contributing factor in those sales?

Shareholder Movements
I have run some analysis of Top 40 Shareholder movements between April 19 (when the placement stock was issued) until today and can confirm that there has not been any sell down from anyone in this group (outside small movement from within a couple of Broker Nominee accounts, less than 3million shares in total over this period). Can only assume from this that the activity we are seeing in the
market is momentum trading from short-term traders.
On the Top 20 or Top 40, I see the management of flows (in and out) from this group as an important part of my role. Obviously we are always striving to create stability within our shareholder base and the best way to achieve this is by consistent communication of our key message and value proposition. This should have the dual effect of creating demand for the shares are limiting supply.
Obviously, external factors (macro or entity specific) can impact on a group’s
decision to accumulate, hold or sell shares. We just need to manage this as part of our overall investor relations’ activities.

Valuation Considerations
I have attached some recent material from CRL that could help with this.
In these slides CRL sets out there estimates of Unit PV-10 value for STACK and SCOOP development units. These are “bullish” estimates that point to unit PV-10 values as high as US$70 million dollars (keeping in mind this is the forecast PV-10 coming from a single 1,280 acre unit) (~US$54,000 per acre).
In our internal modelling we are adopting a more conservative model that
assumes ~$26 million dollars in PV-10 from a single 1,280 acre unit (~US$20,000 per acre).Somewhere between these two estimates would probably be a reasonable guide to what can be achieved, assuming the oil price and market sentiment continues to co-operate.

Refer Continental Resources Investor update May 2018 - http://www.contres.com

All in all much for me to be happy here with my investment long term, quality business team and model for my mind.

I will add my calculation table in another post to ensure that those are mine and not of the company or other source shortly

Keep well Cheers Paul

Expand

The following table is my musing only to track share price valuation on undeveloped acreage prices only with dilution scenarios. As my previous post suggests the weighted average set at ~$16k US is 12 months old and likely to be higher but is the announced bench mark to use

I have also added what would be considered an extreamly conservative valuation for ~8000 acres in the SWISH as a futuristic outlook.

Remembering this does not include developed acreage or royalties and booked reserves. Imo opinion compelling info how undervalued we currently are and where this could re rate too.

All imo and please DYOR and or contact the company for any further clarification of doubt.

Keep well Cheers Paul

(20min delay)
Last 1.0¢		Change -0.001(5.00%)		Mkt cap ! $45.34M

Open	High	Low	Value	Volume
1.0¢	1.0¢	0.9¢	$248.7K	27.05M

No.	Vol.	Price($)
28	22814871	0.009
24	18394099	0.008
8	4333571	0.007
5	2251677	0.006
7	3258000	0.005

Price($)	Vol.	No.
0.010	13892506	8
0.011	53686909	43
0.012	11754609	17
0.013	15654630	14
0.014	12176951	15

The following table is my musing only to track share price...

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