Hi everyone, I think it's time to seperate fact from fiction and give a best estimate of where the the s.p should be post flow rates with Dempsey given some of the blatant attempts by certain posters to distort the immense potential value of this project with short sighted number picking and comparison with peers which is amateurish at best . Numbers outlined below are taken from a QA report commissioned August 16 2016 and provided by Sargasco at the following:
This numbers taken from the report and has not been changed in any sense.
In this report, an estimate NPV calculation was completed for the Dempsey project for which SGC has a 50% share (55% was used in the report) and an idicative valuation of NPV per share was calculated as:
$0.14/share at AUDUSD of $0.75 and a long-term real-2020 gas price of US$3/MMBtu.
$0.23/share atat AUDUSD of $0.75 and a long-term real-2020 gas price of US$4/MMBtu.
These evaluations for the NPV/share were calulated by dividing the NPV by the number of shares available in a company to get the NPV per share. If that number is significantly higher than the current market price, the stock is a good buy. A lower number indicates an investor would lose money by purchasing the stock.
What has changed fundamentally since the report was written.
Firstly at the time of writing the report, the prospective resource best estimate on Dempsey was based on a conventional sandstone multi-reservoirs formation and conservatively took into only the account the two upper level formations:
• The well-known upper level Late Cretaceous Forbes Formation which has a ood chance of finding a modest discovery of around 3BCF of gas.
• The mid-Cretaceous Guinda Formation which is gas saturated when in traps elsewhere in the Basin and could provide a target of 50 to 200BCF.
The analysis then assumed a resource case of a 148BCF development of Dempsey.
This estimate was conservative based on the fact that the biggest payload is potentially in
the underlying early Cretaceous Boxer & Ladoga Formation which was interpreted to have four units named X1 to X4 with intervening shale seals. In aggregate this forms over 800 BCF of targets but these targets were were not included in the initial estimate of 148BCF because at the time of the report this bottom layer was less well known due to limited number of well intersections and because with mechanical drilling and well completion, the inherent risks also increase with depth.
Now that the drill has successfully reached target depth what the drilling has shown in that they have encountered multiple intervals of high pressure gas shows withing this deepest layer which have been confirmed by wire logging and now awaits flow testing. What this means for the s.p. as quoted in this same report, is that the "Resource upside of including these gas shows into the original estimate of 148Bcf is that this has the potential to best case and I quote increase the resource estimate to " 1,100BCF which could see the above valuations of $0.14/share with a gas price of US$3/MMBtu and$0.28/share with a long-term real-2020 gas price of US$4/MMBtu rise many fold."
Now yes it is speculative the amount of gas we will find in the lowest structure and yes it is speculative the rate at which this gas will flow but the potential upside is to be honest huge. We are investors and as investors it is paramount to understand as much information on a company as possible. We realise but unfortunately others with motivated views dont that SGC is an early explorer and our current best resource estimate of 1100 BCF of gas is a best estimate. FFS its a penny stock and we invested in it with the understanding that it's a penny stock but there is no reason why this estimate provided by SGC together with the information contained in that report and outlined above should not be used to make informed decisions taking into account the inherent risk for a project at such an early stage. It is called intrinsic value and is used to predicted future income and value of a stock and can be a valuble tool for investing in penny stocks. Dont let downrampers try educate SGC investors on how penny stocks work and dont try dismissing SGC intrinsic value. Anyone reading the posts of downrampers needs to realise it for what it is. Biased, motivated, one eyed and basically unimportant.
This basic evaluation of the facts provided in the report does not take into account the intrinsic value of proving up The mid-Cretaceous Guinda Formation and what upside this has for the 2TCF Alvarez.
As for the argument that the NPV calculation that SGC will not be cash flow positive until 2021, that is absolute no reason to downramp on SGC and factor this into the s.p valuation or to use it to downramp on the s.p. Many companies on the ASX have huge debt much much bigger than any capital debt that SGC will have which was required to fund their expansion into big companies for which they required loan funding. FMG is a prime example in which multi billion dollar capital loans were used to fund their expansion into the 4th biggest iron ore miner in the world and their s.p rose from a few cents to peak at over 12 dollars while carrying this debt. They still carry debt. The NPV calculation considers the required capital debt and is why the npv per share is such a valuable tool for making an investment decision on SGC. Whats important is cash flow and plenty of it to service all costs including debt repayment. We will have this in spades if the resource measures up.
Finally as quoted by our MD in the latest good oil seminar, the management team place shareholder value of great priority. Every decision they make is to protect it and they have gone on record as stating that production from Dempsey topped up with high flow rates and a large reserve discovery will move the s.p a very long way and quickly. Watch the seminar which has been posted on h.c for reference.
Anway as always DYOR and stay true to your investment decisions. I know I have.
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