Fundamental Value

There are some terrific threads here and valuable contributors and always enjoy reading breakthrough comments that reveals a poster has truely grasped CVN's fundamental valuation multiples for the near, medium and long term...

It is sometimes important to say what goes without saying though...!

Since posting last, the anticipated likelihood of M&A activity has now begun and we have received updated analyst reports from Hartleys, Euroz and Peter Strachan. Of course most the reports are all based on:

~ extremely conservative exploration estimate totals of "PRE"-Production (now) for these initial proven reserves. If we only include Strachan's most conservative current 2P calculation for Dorado, we still have an impressive upward price pressure multiple as a base case. Given this Dorado discovery, and state of the art, modern seismic data technology, further appraisal wells will find more resources and this is supported by historical comparable discoveries, such as Wanaea-Cossack, etc. Surely Mr Market realises this, but Mr Market thinks he can manipulate the timing of providing when fundamental value should be represented...

~ Add in current 1C or 3C for Dorado estimates and the value rises, let alone all the other permits in the Bedout, it is staggering...

~ Add just 1 additional modest discovery out of all the other likely scenario' s in the Bedout, and the "PRE"-production valuation rises again.

~ Now, if we tally the above, how much higher over the $1 dollar mark per share do we value CVN at, and this is still PRE-production.

~ So what does this modest valuation number of proven resources rise to when you progress from a PRE-production value to a Producer valuation and when does it happen?

~ Buffalo: I agree with Cosmo, it appears as though Mr Markets extremely conservative valuation of Buffalo's commercial Oil deposit is like a Buffalo on steroids being restrained behind  a gate until the Production contract is signed off and it's my understanding that this is imminent and not too far away. Julia Bishops recent public announcement about formalising agreements with the Timor Leste govt spoke in past tense...

~ Unless CVN are taken over before hand, we know CVN is proposing Buffalo-10 be both the initial appraisal and Production well, (to not attempt to see if oil is there, but rather establish how much more Oil has BHP given away and has been inherited by CVN, through clever re-modelling, "Carnarvon initially focussed its technical work on reprocessing of the 3D seismic dataset using state-of-the-art full waveform inversion (FWI) technology.  This work supports the interpretation of a significant attic oil accumulation remaining after the original development, based on sub-optimal positioning of early wells using poorly processed seismic data.  Reservoir modelling has been conducted using latest structural interpretation and available well data, including an extensive history-matching effort to calibrate model/well performance to production rates and watercut development (governed by strong aquifer drive) observed during the original production period", "Carnarvon has identified a range of options to redevelop the field and scoping studies show that the redevelopment of the Buffalo oil field is economic at current oil prices; even at the 1C outcome," "Since acquiring 100 per cent of the permit two years ago, Carnarvon has gone through five iterations of reprocessing seismic data from BHP, which produced from the field between 1999 and 2004. The mid-estimate contingent resources are 31.1 million barrels of oil missed by BHP due to sub-optimal well positions from the less-advanced seismic processing of the time.

CVN are establishing how much more oil they have beyond already established commerciality, in a Timor Leste's govt supported, accelerated programe, in shallow 25 metres of water, aimed to commence Q3 2019. That's potentially as early as only 10 months away!!!

~ Hasn't the backbone of the Carnarvon investment growth story always been Buffalo's valuable Oil production commerciality and that the Phoneix project was the gas sidekick....  Instead, CVN have now already discovered a 2nd production project, hugely more significant than Phoneix-3 was ever going to provide with El Dorado... So now, instead of one production well and a gas sidekick, we now already have 2 production wells and an incredible portfolio of prospective permits teased out by state of the art technology and as a result of these early successes has green flagged the entire Bedout and neighbouring basins, "Labrynth, etc" portfolio of which, CVN have a significant interest...!

It is only a matter of time for Mr Market's value of CVN to catch up to the realisation of Buffalo's start date and the multiples available when you apply fundamental value.

How long does Mr Market want to wait to adjust factoring in the final months of "PRE-production" valuation numbers to transitioning into "Producer" valuation numbers that are materially higher. How many billions of revenue was Buffalo's low cost production?

~ Now if we add the above conservative "PRE"-production  Dorado scenario with the Buffalo Project, we are talking about a valuation that is a number of multiples higher than it is today and needless to say, as we close in on Production dates, this can only increase.

We are no longer talking in cents and we are still only talking in terms of a "PRE"-production valuation! No wander Adrian needs to sigh when he pauses to reflect on his impressively acquired portfolio and its magnitude...​

~ Unlike some other much riskier investments discussed on HC, what comforts me most with CVN is knowing that even with what we ALREADY have, de-risked, in Buffalo & Dorado, we have such attractive upside multiples that are going to mature!

~ Is CVN an attractive target... Nice work Adrian Cook.