over a whisky, page-24

Hi Whiskey,

That's the challenge wrt to Cline.

Nothing stopping a JV to be restricted to just Wolfberry (assuming we have a stacked play).

Numbers thrown around industry for that are $20/bbl 1P (which we aint got), and $150K per flowing boepd which we can demonstrate. Suggested also that PDP is going at PV8 (I guess that is calculatable from curves provided).

If one uses LPI and now Energen (thanks Acreage), they say:

LPI = 22% IRR @ $90 oil, 138 Mboe EUR (65% oil) $2.2M Capex
EGN = 33% IRR @ $100 oil, 155 Mboe EUR (61% oil) $2.3M Capex

EGN paid $65.8M for
3,200 acres with 29 producing wells, 50 undeveloped locations, 8.5Mmboe 2P reserves.
Estimate of $115M to develop (i.e. $2.3M/well).


So it ought to come down to how the 2,300 acres is being spruiked to partners.

Assuming we can say 40 acre spacing for development (so about 60 locations and 4 drilled - 7%)
What acreage have we derisked?
What is our flowing boepd, EUR and %oil?

So assuming same setup, looks something like

EGN $66M split as
PDP location = $1.2M x 30 = $36M
PUD location = $600K x 50 = $30M

then

GGP could say our "value" for 100% WI of Wolfberry is
PDP location = $1.2M x 5 = $6M
PUD location = $600k x 55 = $33M

So for 100% = $39M +/- 20%

That would coincide with 267boepd of production from the asset (4 wells at about 70 boepd)

So SG what are we dealing with?

$20M for 50% WI to farmin plus a bonus payment?

This really should be that hard given the number of transactions that are occuring in the Permian. There may of course be a problem somewhere we don't know about!