if you ever had any doubts about how valuable ICN's share of ATP855 might be, have a read of this.
This is a copy of a Euroz report.
It has just been posted on HC on BPT thread.
It is publicly available
http://www.beachenergy.com.au/IRM/Company/ShowPage.aspx/PDFs/2892-35796836/EurozSecuritiesLimited
the reason I have posted it here are obvious.
the bits I was surprised at is the bullish nature of the report, and the statements wrt cost advantages of development, and fact that they seem to be saying that, given the flows of Holdfast and ENcounter, that field devt might be feasible with just vertical wells - ie not laterals?
they also refer to non-shale potential
and the value they attribute to 218, must necessarily flow thru to 855 - if you assume "play" extends across border.
((( also:
"ullage"- vacant container space - the amount or volume by which a container, especially one for liquids, is short of being full"
2. lost liquid - the amount of liquid lost from a container through evaporation or leakage"
"contango" - interest payable when delivery delayed : interest payable by a broker when the delivery of and payment for stock is postponed
++++++++++++++++++++++++++++++++++
Investment Case
We maintain our positive view of the large upside potential of BPT’s
unconventional Cooper Basin JV (CBJV). The size and scalable
potential of the unconventional assets make BPT an attractive
investment in an Australian mid-cap energy sector where growth and
optionality is hard to find. The current 10+ well programme can create
significant share price momentum over the CY. We retain our Buy with
a price target of $2.00/sh.
Key Points
- Production for the Dec Q of 1.72mmbboe was in-line with our
expectation.
- Reinstatement of the Tantanna pipeline in the Western Flank
has enable BPT to maintain guidance of 7.5mmbboe for the
full FY.
- The PEL91 and PEL92 Western Flank programme has netted
3.5mmbbls to BPT, pre-Bauer.
- Discovery and successful appraisal of the Bauer Field should
add materially to Western Flank inventories and capacity to fill
expanding, 15,000bbl/d (BPT av equity 55-60%) takeaway
capacity (due for commissioning from mid-CY).
- The Esso royalty for BPT’s Delhi asset was successfully
renegotiated at a lower effective rate.
- An unconventional well programme has commenced
comprising: 3x horizontal (from Jun Q) and 5(+3)x vertical
wells from the Mar Q.
- Encounter reservoir stimulation expected to be commenced
mid-Feb.
- The Moonta-1 well is drilling ahead and will test 400-600m
thick Patchawarra Formation’s tight gas potential.
- A data room was opened in the Dec Q to attract potential
farminees for the unconventional CBJV programme.
- BPT successfully acquired ADE following its unconditional 20
cents per share on-market offer.
- This valued ADE at ~$94 million for its Cooper Basin interests
that included ADE’s 200Bcf share of the Holdfast resource.
Analysis
The large upside potential remains with BPT’s emerging Cooper Basin
unconventional gas play and the realization of higher east coast gas
prices supported by domestic and export demand growth.
We believe that should BPT’s shale project demonstrate economic
viability, the Company – given the size potential of its Cooper Basin
interests – is the best placed to attract corporate attention.
We are of the view that the shale/tight sand qualities will drive some
exceptional (+10mmscf/d) flows from the horizontal wells in time and
that opex of <$4/mcf will be achievable in a development scenario.
We also flag that the cost-benefit equation may yet see large swaths of
the Cooper Basin Shale (in a development scenario) be developed
with vertical drilling given the consistency (in terms of productivity),
pressure support and thicknesses of the Roseneath-Murderee-Epsilon
and Patchawarra unconventional sequences.
This would obviously dramatically lower well capex cost hurdles,
providing for compelling economics, should vertical flows of 5mmscf/d
be established: We believe this highly probable.
Our price target set is ahead of our $1.83/sh valuation reflecting the
huge upside to the unconventional 2Tcf gas resource we foresee with
the upcoming 10+ well programme: The revised resource (Dec H’12)
could several orders of magnitude higher. In the interim we believe
that substantially more flow data will highlight the economic viability of
the play which could elicit a corporate outcome within the next couple
of years.
Thus huge optionality exists in BPT for its shale project (>$2/sh
additional value) - we factor a nominal shale value of only $0.20/mcf
for a conservative 4 Tcf of recoverable gas from the CBJV - $800m.
This compares with implied 3P reserve metric range for Australian
CSM transactions of $0.53-1.88/mcf over the last 5 years. Our
valuation without any value for the CBJV is $1.15/sh.
As a sense-check, we highlight the value potential BPT clearly see
through the implied $0.47/mcf paid for ADE’s 200Bcf vs the $0.20/mcf
we assume in-ground.
With long term east coast domestic gas contracts rolling off over the
next 5yrs, projected demand growth, coupled with potential supply
draw from GLNG is suggestive of a contango in gas pricing that can
realize +$6/mcf.
Whilst Exxon-BHP are making noise regarding the potential for
currently stranded Gippsland gas molecules to meet some of this
demand, we are a little more circumspect that an offshore gas
development can be sanctioned within this 5yr window of opportunity.
We’d argue that an onshore unconventional gas resource is more
nimble to incrementally meet the growing demand because:
1) The capex to establish new supply is incremental ie well
by well vs offshore that requires a large appraisal drilling
capex hurdle (say $20m/well) before capex for
development and landing ashore is considered
2) Capital commitment is therefore much easier for a well by
well development on that basis as relative gas pricing
uncertainty vs large capex to first production will slow offshore
development traction
3) Ease of access to takeaway capacity for the Cooper
Basin due to existing network of infrastructure
underpinning short tie-back
4) Sufficient existing ullage: Moomba is already short gas
with Santos already committing purchase of a substantial
portion of BPT’s existing conventional gas reserves
In any event, we foresee that significant landholder opposition and
environmental regulatory hurdles (beyond which back-fill gas for rampup
CSG gas if at all) exist in the CSG to LNG sector that will drive corporate outcomes to secure additional ‘insurance’ gas.
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