Hi All,
Having reviewed some further data relating to the potential NPV of oil insitu in the Sangomar area I have rerun my potential value analysis for the Bambo-1 well's objectives based on an NPV of oil insitu.
My concern is that my estimated value of insitu oil of A$6/bo (A$6MM/MMBO),based on the sale transaction, could be significantly undervaluing any discovery due to A$6/bo being heavily discounted due to FAR's distressed seller position coupled with the Covid crisis and related route in oil price.
A StockAnalysis publication from 26/6/2019 (excerpts in Slide 6)
states an NPV for the Soloo-1 well (as Bambo-1 was then called) of US$10/bbl insitu.
At a current exchange rate of 72.5c this equates to A$13.79/bbl insitu. Even though this was published over 2 years ago, considering the oil price at the time was ~US$56/bo (Slide 7) with the recent oil price averaging somewhere in the vicinity of US$70/bo - IMO this would likely compensate for any infrastructure cost differences (and their is the possibility that these have not appreciated at all since then due to lack of oil drilling & developments) and thus provides
a valid ball park NPV value.
StockAnalysis ceased publication some time ago but IMO provided high quality cost assessments of oil drilling, appraisal & development projects.
In Summary:
Slide 1 covers my assessment, with reference / background information in Slides 2, 3 & 4.
Key Points:
-
The only objective that I have based my own investment assessment on is for the Soloo objectives. I have included the Bambo & Deeper Objectives for completeness / unlikely eventuality that they are discoveries (high risk).
- Slide 2 references the Best Estimate P50 values used in calculations.
- Slide 3 references the Sangomar / Soloo Prospect schematic. This has been used by FAR for a number of years now and clearly indicates the Sangomar Field reservoirs (S410, S420 & S440 (formally S500)). FAR at some point in time post the ASX IP 30/10/2019 changed the nomenclature of the S500 reservoir to the S440 reservoir (Slide 4).
Valuation for "Full Field" values:
- Bambo objective = $27.65/S
- Soloo objective = $10.31/S
- Deep objective = $19.39/S
- All objectives = $57.37/S
Value that Market may give on a discovery???:
In the spreadsheet I have left the Soloo objectives in for FAR's net 85.4 MMBO P50 value and show this value at its 25%, 50% & 75% A$/S levels.
What the Market (Brokers, Institutions & high net wealth investors) may give FAR on a successful Soloo discovery is, with any discovery, extremely difficult to estimate.
In Slide 5, I have included a list of what I think other key factors that may influence the share price on a discovery - no doubt there are many, many more.
IMO on a Soloo discovery, the potential for FAR to sell their interest into a rising oil price environment will hopefully keep a premium in the share price relative to a base level. If we could come away with something north of the 25% value on the discovery well - I'd personally be extremely happy with my investment.
GLTAH for the results
Cheers
VOGC
(20min delay)