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.
ICN Price at posting:
19.0¢ Sentiment: None Disclosure: Held
(20min delay)