PCL might be a great story, but this line about "WPL are...

PCL might be a great story, but this line about "WPL are spending (up to) 50c per PCL share to farm in therefore PCL shares are worth 50c" is total drivel. What are the chances that Woodside will go as far as spending the full 50 cents?? - there are three or four points along the way where they can drop out - if the 2D isn't promising, if the 3D is disappointing, if the first well is a duster, ....

Even after all that, how much equity is PCL left with if Woodside spends its full "50c/PCL share"?? Would PCL be worth 50c per share if they were going to be left with 0.0001% of the equity after the farm in?? Obviously not.

In Mauritania, Hardman was left with 20%+ after the big boys farmed in. From memory PCL will have half that percentage if Woodside goes all the way.

To do the sums properly, work out what the total permit would be worth if WPL commits to going all the way with its farm in. A fair value - unless the first well hits the jackpot like Chinguetti did - would be Woodside's expenditure divided by Woodside's equity share (70% from memory?), plus a little bit. PCL's 10% would then be worth 10% / 70% of what Woodside has spent. Sounds like about 7 cents per share, not 50 cents. And this is only if Woodside goes all the way!

Of course, it might turn out (like Mauritania) to be worth a lot more if things go really well, but the odds are against that. The most likely outcome is that Woodside spends some of the money - maybe even drills one well - and then walks away.