No wonder COE weren't rushing to get this resource assessment finished... they said intersecting the formation high should have positive implications for the assessment, but instead their 111 MMboe oil field has shrunk to 21 MMboe according to the independent consultant. 19% of what it was!
Not sure what the main cause of the write-down is but I suspect they might have basically written off the matrix porosity and made this a purely fracture play.
Still not a bad result by any means, 21 MMbbls is a very decent sized field and potentially worth a lot of money, and it's good that they've basically re-affirmed the commercial cutoff is about 10 MMbbls. However, instead of a 10-fold margin of safety they are now basically only a 2-fold margin from their median estimate. Commercial risk just got a lot higher.
Also fairly disingenuous of COE in my opinion to bang on for months about getting an independent resource review, then putting out the announcement with their own (naturally higher) number in the title. The proper thing to do would have been to put out the Senergy estimate and then say COE believed the RF should be higher, and then present their alternative... but that doesn't look as good, particularly when you've just overwritten your previous 111 MMbbl estimate. You can argue til the cows come home about whether COE are justified in their higher NPV but at the end of the day, Senergy are independent, COE are trying to sell the project. Pretty obvious whose estimate is more objective.
The biggest problem of all is that it really kicks the EMV of the project in the nuts when you have wells costing $50M and the success case project NPV is only $210M. A COS less than 25% will push it into negative EMV territory.
Looks quite a bit different from NPV of $1.1B and well cost of $30M, where the COS would have to be less than 3% before it wouldn't be worth chasing.
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