sale of zola/bianchi prospects., page-166

Not sure I can add any meaningful to the mgmt/SP correlation punching bag debate

There's only 4 or 5 "real" O&G companies on ASX anyway - the rest are juniors and wannabees. Exec compensation is one thing, aligning compensation with shareholder value is another, and RISK taking is a whole different ballgame in my opinion (its usually a step ladder up and an express elevator down).

TAP SP is more correlated to boepd production (and I think slide 6 of the recent investor presentation shows this). Many O&G are.

My reason for holding TAP (as a fairly recent investor - but still before the Manora cost increase and delay) is really for 4 things.

1. Manora, Manora and Manora (OK that's 3 of them)
2. Saleable gas discoveries to a bigger player


Why Manora - because I held Coastal Energy (on TSX) which was acquired and the beginning of this year by CEPSA. Coastal primary assets were developing offshore oil Gulf of Thailand (also had RSC in Malaysia - for the ROC followers)

Acquisition was CDN$19/share which was about US$2B (no real debt to speak of so EV approximates MC). For US$2B CEPSA got approx 23,500 boepd and 144MmBOE of 2P reserves.

Now do the valuation metrics:

boepd multiple approx US$85K per flowing barrel
EV/2P multiple approx US$14/boe


There is a disconnect right - because with Manora at 4,500 boepd net to TAP and 6.1Mmboe of 2P the "value" is

@2P = AUD$94M and at the high side
@4,500 boepd = AUD$420M (using 1.1 AUD to USD)

Some of this can be explained away by 2 things:

1. continued production growth (Coastal has it, Manora flatlines), so the $85K/boepd would be discounted down - more like $50K/boepd

2. Is the 2P dominated by 1P PDP. In the case of Manora, it is likely to see rapid conversion from 2P to 1P PDP once platform gets producing (and a typical multiple of US$30/Boe). Might even get the 2C to 2P. My guess then is 6MmBOE of 1P PDP + 2MmBOE is worth US$225M or AUD$250M.

The rest of the company is "free" on my metrics.


My timeline is of course different to the long termers - I'm making my judgement based on Manora (and bear in mind they are not the operator), and whether they can monetize gas assets in a superior fashion and then what they will do with the cash.

Pissing it down a wildcat hole in any part of Africa doesn't rate at all highly. In fact wildcat offshore exploration or onshore US shale is not a place for tiny tots.