morefish, You are miles out on the cost of re-entry in Tunisia....

morefish,

You are miles out on the cost of re-entry in Tunisia. Dragon originally quoted $35m gross.

I think you also seriously underestimate the potential of Nigeria (for relatively low risk, and relatively low capex on a net base). You just have to look at the Afren presentation, they are bullish on the whole area around OML113 and OPL310 and will be looking for the deeper areas.

Also, getting production up an running will have a 2 fold impact on JKA. It will protect holders in so far as future CR will be minimised and also provide a revenue stream to access further debt funding (I think they will fund Aje development through an RBL facility - potentially one controlled by the JV on an asset basis rather than a seperate facility for each company - depends how much they trust each other really).

For me the sale of Aje should be non-negotiable. Like it or not, the asset ios essentially fully appraised and should be receiving a value far greater than around $1.50 / barrel which they will get if they sell if for $15m.

Bear in mind that assuming the first 2 wells come on at a combined 10k bopd, they will generate revenue of around $18m or free cashflow in the region of $11-12m, yet we want to sell this less than 2 years away and approved (not yet with FID but I think thats a no brainer) for barely above 1 years cashflow.

In terms of near term value drivers for holders, selling Aje at $15m surely would not be the optimal method of funding the business going forward.

I still think they will either be farming out a further portion of Somaliland or getting early payment of the contingent payments from Sterling, purely because they were stating that they were looking at coming out of suspension with $10m in cash, and that would mean only about a $7m receivable.

I agree with you on Somaliland, that the upside is huge BUT if you are balking at the development budget for Aje, then I'd hate to see what you would do with this one IF they find anythign down there. Remember we are only free carried for 1 well, there will need to be at least 4 on any discovery and the development budget would be massive with very long timescales due to the remoteness of Somaliland. They may be able to run a pipeline to the coast, but then I have no idea is Somaliland have a deepwater port (my guess is no), otherwise they would need to run a pipeline either south towards Kenya (a VERY long way cost a bucket) or up towards Sudan (again a very long way).

It could be a great asset, but I would be quite happy with them keeping hold of Nigeria and selling down Somaliland towards a 10% interest as I feel the upside and protection that holders will get from Aje (without even considering the upside proven by Ogo) will be far more value accretive than Somaliland purely due to the ongoing appraisal / exploration costs and then final development costs (if anything is found, bear in mind they may not be quite so lucky as Tullow have been in Kenya, and could take several bites of the cherry to find anything).

Ps. I haven't seen the rights issue documentation, hoopefully it will be there when I get home.