In order to report proved gas reserves you need to have a contract to sell them into and the size of that contract limits the amount of proved reserves you can report - unless there is a spot market to sell the gas into. Really Magellan should have been reporting no reserves (only contingent resources) until they had the contract signed but that doesn't mean that is the recoverable number.
It is also worth noting the context Magellan were operating in .e. Magellan were constantly trying to hold onto Dingo under a retention licence on the basis that the discovered resources were too small to monetise - at least that is what they were telling the regulator.....you don't want to be saying the field is too big under those circumstances or you are likely to lose the licence on the basis that someone else comes forward with a proposition to develop the field. Uncertainty is usually used to bump up reserves but it can equally be used the other way.
The fact that Palm Valley has been depreciated to a book value of close to zero is neither here nor there and is usually the case for fields at the end of their lives.....capital has been written down over 30+ years. Plus they would have amortised it on the old gas contracts and there are now new ones in place.
CTP Price at posting:
33.5¢ Sentiment: Buy Disclosure: Held
