Consider this:Price of La Punta deal: USD 1.5 million up front...

Consider this:

Price of La Punta deal: USD 1.5 million up front
USD 1.3 million for seismic pre La Punta 2
USD 2.0 million cash
USD 4.8 million

Revenue: 115 bbl/day x USD 50 / bbl x 300 days per year
= USD 1.725 million

Payback < 3 years

Assumptions:
- no inclusion is made for revenue from liquids stripping business.
- USD 50 bbl (currently oil is ~ USD 80/bbl)
- Producing 300 days per year (no idea how realistic this is)
- the residual payment of AUD 5.7 million only payable if La Punta 2 is worth developing (maybe someone can ask Baraka?)

On this basis, La Punta looks like a good deal.

If you assume that the residual of 5.7 million is payable, then the total price is USD 10.5 million and payback becomes ~ 6 years on La Punta 1 production only.

When buying any business, the idea is to buy something to which value can be added. If La Punta 2 can produce even at the same rate as La Punta 1, payback becomes 3 years again. If La Punta 2 produces at greater rates (ie. 5000 bbl/day, 414 bbl to Baraka) then revenue from La Punta 2 is 6.2 million. Add this to the 1.7 from La Punta 1 and you have total revenue of USD 7.9 million.

The success of this deal is riding on La Punta 2…drill on.

ado