Happy spud day!, page-71

David Deloub has answered some more investor questions on the investment hub.

whbrown 09:31 10/08/2023 Asked?
Hi David,

Thank you for organizing this space to take questions. I have 2.1. If you had to choose a primary metric to assess the success of new investments such as this new well, which one would it be? 2. How do you compare opportunities like this participation agreement to other capital allocation options, particularly in the context of the balance sheet?
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David Answer:
Hi William.
Thank you for the questions. Please see responses below;
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Q1. The one we like to use is "payback period". That is, time it take to recover the initial capital investment. We calculate this after each potential project is risk adjusted so we are comparing apples to apples. This takes into account the forecast production profile of the well (decline curve) which allows us to determine what the return on investment looks like at different points in time.
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Q2. Capital availability (cash at bank and forecast net revenue from the existing portfolio) is considered in the first instance. We then take a look at the different risk/return profiles of each of the opportunities and rank them accordingly. . If they don't meet our minimum hurdles they are passed over. Apart from the pure financial metrics we apply (NPV, IRR etc..) other factors we consider include, Reserve Estimates, Break-even Price, Operating expenses and Lifespan of the well. Well Control data ( production history) of existing wells in the vicinity of the opportunity. Technical complexity of the Drill, Complete and Tie-In. Experience and reputation of the operator. Daily production rates. Transportation and processing infrastructure availability and capacity. Land management issues and Decommissioning costs. As you can see, Investing in an oil and gas well can be complicated, given the technical, financial, and regulatory aspects that need to be taken into consideration.

Regards.
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