shrewd crude, page-16

hey mabz,
I actually study finance and IRR is flawed for many reasons...
I never use it... I use OCC...
IRR doesnot distinguish between borrowing and investing...
There maybe multiple IRR's, and under some Situations IRR maynot exist...
There is problems with mutually exclusive events...
and setting the NPV=0 to work out IRR is not wise because we cannot acturately predict when production will begin, let alone if it will begin at all, and its flawed because of no flow rates....
Using these models IMO are only valid if you have numbers to work with and We cant just pull flow rates out of the air because MEO wont test it...
...
At this stage the only real way to work out A value for MEO is through a probability tree by working out what the failure costs are mulitplied by percentage chance of that... and working through what the outcome of a successful discovery is worth, Multiplied by probability of success...
Theres no need to complicate this finance stuff, its really that easy when we have no numbers to work with... you would have to discount the value of a successful discovery for it to be correct... id say around 15% discount rate...

I saw something here a few pages back which said 33% success at Blackwood... this is a good starting point for you...

The only Real way to select a rate of return that the firm desires is to Compare your return against projects with similar risks... This is called Opportunity cost of capital... It is what you could return on your project compared to risks of a similar one... It is not in terms of The opportunity cost of debt payments but rather the opportunity cost in terms of other investments in financial markets... this is important...
Now, it is impossible to determine an accurate IRR or NPV without flow rates...
well this is untrue, You could make numbers up...
But I tend to follow certified numbers and work from certified reserves...
Yes this is a discovery, and yes there is a shiite load of gas down there...Gas in place worth many multiples of the current market cap...
....
What is this gas worth if you cannot economically extract it?
Id say its worth nothing to the company!...

Ive never argued the point of discovery, it was always going to be a discovery... ... but, if you cant flow test it at economical rates (eg Heron), then your NPV is negative... And when you come out with a negative NPV because of flow rates far to low then you choose not to flow test it so you can buy some time (eg Blackwood)....
For the two key projects GTL, and Methanol plant, more than 1TCF would have been required for it to go ahead...
....
Gas will oneday flow to the surface from this permit... It willnot flow to the surface with MEO running the show...this is because MEO have run out of money... they are finished...
MCap is currently too high...
So in conclusion, This is a discovery, there is so much gas down there worth multiples of the current market cap... there is no way to economically extract the resource to the surface to create the cashflow to create a positive NPV project through Gas to Liquids or Methanol plant...
end of story...
This is all Just My opinion only...
...
If your company discovers, and you dont flow test it... then something dodgey is going on... this is a major signal to me....
just like the signal when STO sold out, just like the signal when MEO made a large placement through to a large institution at $1.25 before Heron production test ...
we at first choose to ignore these signals...
Just how lucky were we to get that 6MCF ann is what I will be telling my grandchildren....
Before I shoot off, Some of you lot need to wake up and think why MEO didnot flow test Blackwood...
Im not ramping to buy MEO... I wont touch this stock again...
Im a cashed up student chasing some of these amazing oil plays..
like VPE and RPM...
Disc, VPEO, RPM, AKK, LMPO...
theres too much potential out there to be worrying about MEO's large in ground resource which willnot be produced any time soon...
lata all you cats...