events and price thoughts

The news of the lst two days and the timetable from the AGM presentation give a bit of an idea as to what may happen in the coming months. There is certainly no shortage of price drivers given drilling at Vietnam, Glau, Paris Valley and enhancement drilling at NSA.

In no particular order here are some thoughts on the proposed events and what effect they may have on the sp.

Glau: This could be a replication of NSA though it appears to have a greater areal coverage so the reserves could be larger. Production requirements should be similar to NSA given the similarity in geology.

Characterised by shallow wells taking approximately a week to drill for say $300-$500 per vertical well....more for horizontals which are most likely to be the method for production wells.

If it does follow NSA in pattern initial flows of up to 500bopd should be achieved, progressively dropping to 100bopd after 12 months or so.

Given this could be quick to bring into production in 2/2 at say a 2P reserve level of 4MB I would think 10cps would be in order or thereabouts.

Paris Valley: Again a shallow well programme with cost per vertical well less than 500k (the NPV well cost $275000). This project is currently waiting om permits. All seismic and site location planning is complete. This could mean PV drills at a similar time to Glau if not before.

2P reserves here are already certified at 9.1MB. This is yet to be recognised in the sp, mainly in my view because we need proof that PV will flow commercially.

Commercial flows should see the asset value added into the sp at approximately 35-40cps.

NSA: When we get the permit for the replacement water disposal well current production constraints should be eased within a month. I would like to think NSA could then produce at a sustainable level of 500bopd if not more.

Other thermal enhancements may improve this flow rate further.

The asset value of NSA is unlikely to change in terms of growth in the inground reserve however their conservative recovery figure may mean there is scope for the 2P figure to rise. No guarantees on that, its pretty much a wait and see scenario.

Paloma: While the work onsite drops off the resource remodelling and farm in partner will be the focus of attention and will potentially unlock value the market has been reluctant to give. A farm in partners effective endorsement of Paloma should mean a lot assuming terms are attractive to Neon holders.

I would'nt see full value achieved initially but taking a guess I could see something in the order of 20-40cps assuming we retain 45%. 20cps with the farm in partner growing to 40cps as production occurs.

Vietnam: Two key price drivers in the short term are the announcement of rig contracts complete with drill timetable and the updated seismic information, both due in this quarter.

What it might add is hard to say but given success on the first well(Block 120) could be worth 250cps I would think 20-40cps could be in order by say April.

Other Considerations: Edison is yet to be reported on. I know very little about this project. I assume, possibly wrongly, that is small in nature perhaps like NSA.

NSA easterly extension is still a mystery. We now have 12000 acres of which NSA and Glau account for a little over 1000 acres. Pancho Rico accounts for a small chunk of the remainder.

Summary: As we are painfully aware sometimes projects take longer than expected so not all this may unfold as above nor is success guaranteed but it does highlight the possibility of upside of 55-90cps before any success at Vietnam mid year.

Just my thoughts team. Pleased to hear what others think.

Neon persists in putting in their presentations that they are on the look out for new ventures to add circa 25MB. With cash on hand this is always a wildcard.