Interesting discussion concerning the JV proposed for the drilling of these two additional wells. We have sold the vast majority of our holdings already for a significant profit as well as picking up the additional 3% on any production there form. We now have got the same company coming back and offering another deal where they they take 85-75% of of the production for the cost of drilling,i.e., say $6-8million. When average production in this area is around 1000 bopd @ $65pbo(US) x 2 holes x 50 days of production = holes paid for. There is a whole lot of days left after 50 and the percentage offered is not that high in my opinion, remembering they have approached us.
I would hope that TB and Directors think seriously about accepting offer on these terms. Understand that there may be other considerations in play (more substantial JVs, possible Take Over, etc.,) but with $60M in our bank we are not necessary short of funds. Surely there would be lesser players in the USA with access to a drill platform or two that might want to play with SNN at a much lesser cost(%).
An extra 10% on production of say 1000bopd equates to around $6,500 per day or around $2m per hole per year. A little hard board might be required when negotiations are seriously commenced, imho!
SNN
sonnet corporation limited
