Another question, given our newly stated go-forward...

Another question, given our newly stated go-forward strategy,
What is 150 BCF at 2P worth?




Prompt to Grok:What is 150 BCF of 2P natural gas reserves worth in $AUD given Wallumbilla Hub prices

Response:

To estimate the value of 150 billion cubic feet (BCF) of 2P (proved plus probable) natural gas reserves in Australian dollars (AUD) using Wallumbilla Gas Supply Hub prices, we need to consider the market price of natural gas at the hub, conversion factors, and some assumptions about 2P reserves valuation. Below is a step-by-step calculation based on available information.

Step 1: Understand Wallumbilla Hub Prices

The Wallumbilla Gas Supply Hub is a key trading point for natural gas in Australia, with prices typically quoted in AUD per gigajoule (GJ). Based on available data:

• Historical volume-weighted average (VWA) prices at Wallumbilla have been referenced, with an example from March 2017 showing $8.30/GJ for trades at South East Queensland (SEQ).
• More recent data is sparse in the provided references, but the Australian Competition and Consumer Commission (ACCC) publishes LNG netback price series for Wallumbilla, which reflects domestic gas prices influenced by international LNG markets. These prices fluctuate but are often in the range of $8–$12/GJ for short-term spot prices in recent years, based on industry reports and market trends.
• For this calculation, we’ll assume a conservative spot price of $10/GJ, as a midpoint of recent price ranges, acknowledging that actual prices depend on market conditions, contracts, and global LNG dynamics.

Step 2: Convert BCF to Gigajoules

Natural gas prices at Wallumbilla are quoted per GJ, while reserves are given in BCF. We need to convert 150 BCF to GJ:

• 1 BCF ≈ 1.055 petajoules (PJ) (since 1 cubic foot of natural gas ≈ 1,055,000 joules, and 1 PJ = 10^15 joules).
• 1 PJ = 1,000 GJ.
• Therefore, 1 BCF ≈ 1,055,000 GJ.
• For 150 BCF:
  150 × 1,055,000 GJ = 158,250,000 GJ.

Step 3: Calculate Gross Revenue

Using the assumed price of $10/GJ:
158,250,000 GJ × $10/GJ = $1,582,500,000 AUD (or ~$1.58 billion AUD).

Step 4: Adjust for 2P Reserves Valuation

2P reserves include proved (1P) and probable reserves, which are not 100% certain to be extracted and sold at current market prices. Valuation of reserves typically accounts for:

• Recovery factor: Not all reserves are recoverable due to geological and technical constraints. A typical recovery factor for 2P gas reserves is 70–90%. We’ll assume 80% for this estimate.
• Extraction and transportation costs: Costs to extract, process, and transport gas to Wallumbilla can be significant, often reducing the net value to 50–70% of the gross revenue, depending on the field’s location and infrastructure. We’ll assume 60% of the gross value remains after costs.
• Discounting for future production: Reserves are extracted over years, so their present value is discounted. For simplicity, we’ll apply a 50% discount to reflect net present value (NPV) over a typical production lifespan (10–20 years).

Adjustments:

• Recovery factor: 158,250,000 GJ × 0.8 = 126,600,000 GJ.
• Gross value after recovery: 126,600,000 GJ × $10/GJ = $1,266,000,000 AUD.
• Net value after extraction costs: $1,266,000,000 × 0.6 = $759,600,000 AUD.
• Present value after discounting: $759,600,000 × 0.5 = $379,800,000 AUD (~$380 million AUD).

Step 5: Consider Market and Economic Factors

• Price volatility: Wallumbilla prices are influenced by domestic demand, LNG exports, and global energy markets. The ACCC’s LNG netback price series suggests forward short-term prices (2 years) and medium-term prices (5 years) can vary, potentially affecting long-term reserve valuation.
• 2P uncertainty: Probable reserves have higher risk than proved reserves, which may further discount their market value.
• Infrastructure access: The Wallumbilla Hub’s role as a pipeline interconnection point means transportation costs to the hub vary by field location, impacting net value.

Final Answer

Based on a Wallumbilla Hub price of $10/GJ, 150 BCF of 2P natural gas reserves is worth approximately $380 million AUD after accounting for recovery, extraction costs, and discounting.
This is a rough estimate, as actual values depend on specific field characteristics, contract terms, and market conditions.
For precise valuation, consult detailed reserve reports and current market data.

If you have more specific data (e.g., exact current Wallumbilla prices or field-specific costs), I can refine the estimate further.