buyers keep increasing over 200 now!!, page-13

Once an operator gets an invoice end of the well, they sort out any anomalous dollar value rationally, in this case there's a threesome JV so each will argue its own case. Anyway that should b the case for their accounts team to worry about.

My estimate is between 15-20mil for Neon's share for 2 rigs.

The reason why the drill costs aren't available yet is 'coz the operator needs to release the rig first & that probably will b this month.

As an example one could expect the Mercur 2b released by 7th Jan & then Ensco prolly soon.

P&A doesn't necessarily mean 'lets go shows over'.

One usually sets multiple plugs, cuts the casing, wellhead, does a seafloor survey & only then will an operator release the rig to its nxt job.

So for the Dec qtr they should b ok, but for the upcoming March qtr they'll need additional cash or IMHO give ENI additional equity. ENI can drill the remaining targets when they have more confidence in the calibrated 'misties' from their 3D seismics.
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Scenario for cashflow for Dec is straight fwd, example below

Sept end they had $17.9 mil
Add apprx $2.5 mil in Revenue frm Calif,
deduct $4 mil opex for calif & corporate costs etc
Blnc: $15 mil by Dec end

Q1'14 will see them in deficit, unless they drop 'Nam by say another 10-15% & just focuss on Calif.


Example for NEN's March qtrly will b,

Cash: $15mil (using my abv estimates)
Add Calif Rev: 2.5mil
Deduct opex/Corp costs: 4mil
Explor costs: $15-20mil
Cash blnc: 15 + 2.5 - 4 - 20 = -ve

So they may opt for a CR or drop further equity in 'Nam.

Case for Blk 105 drilling:
Spud: 11th Aug (they probably had the rig handover 2-3 days earlier)
Rig Release: 19th Jan (as an example)
Ensco Jackup Rig dayrate: US170k/day
Rig days: 161
Cost: 161 x 170k = $27.4mil
Capped costs: $25mil (after which NEN pays 25%)
Drilling costs + contractors + fuel + longlead items + Prod Test: $50mil (conservative case)
Total drill costs: 27.4 + 50 - 25 = 52.4mil
NEN's 25% share of this: 52.4 X 25% = $13.1mil


Case for Blk 120 drilling:
Spud: 21st Oct
RR: 4th Jan
Days: 75
Songa Mercur semisub dayrate: US250k/day
Cost: 75 * 250k = $18.75mil (round off $19mil)
Drillcosts etc: 300k*75 = 22.5mil
Capped costs: 20mil
Total drill costs: 19mil + 22.5mil - 20mil = 21.5mil excess
NEN's share: 25% * 21.5mil = 5.4mil


NEN's Total share: 13.1 + 5.4 = $18.5mil (which is in the ballpark $15-20mil, I mentioned above).

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If one were to wipe out Vietnam valuation & rollback, then their net assets as per their 2010 Annual report were worth 13c, 2011: 14c. That's what the fair value of the stock is, on paper.

Obviously 'Nam was the company maker prospect, since the Exxon discovery & Dongfang nearology, that had people talking abt Neon as the nxt big thing, which isn't the case so on a rollback basis still, their SP will need more confidence boosting announcements to move north IMO.