CVN discovery metrics and FAR valuation

Today's discovery announced by CVN if it comes in at pre-drill expectations of 125 million boe (gas and condensate) which is about 25 million boe to CVN for its 20% has been valued by the market at around A$78 million as its share price has gone up nearly 60% and market cap has risen from around A$130m to A$208m. Now that's for 25mboe at discovery stage. So a bit over A$3 per boe.

Comparing this market valuation of CVN's boe discovery to what FAR has at SNE is not very meaningful as SNE is oil (mostly) and a great deal further advanced towards development (appraised and approaching development approval). But comparing this discovery of 25mboe for CVN valued at $78 million by the market with what our share (40% currently) of 825mbbls at Samo is worth to FAR very tasty indeed. That would be 330mbbls ... so on today's CVN market metrics that would be 330/25 x A$78m = A$1,030 million. And that does not take into account the different valuation of oil versus gas and condensate. So about 20 cents per share to FAR. That's the potential value on discovery ... a similar A$3/bbl to CVN's A$3/boe. Once it is appraised and gets to FID (a few years perhaps) it should be worth much more than that ... Cairn's NPV for SNE is US$10/bbl = A$12/bbl at FID. The $1.00 FAR party remains a possibility BUT there are many "ifs" ... oil price, success at Samo, goverment approvals etc

Dream on I say .........

H