slowly getting my head around

Hey all

Just got of the phone with spozzie after a long chat we are getting close to a NPV.

We both agree that CMX must have some good cred. They have been in business for 20 plus years and if you where a moron at your game there is no way either of us can see Chesapeake JV'ing up with you, so we have confidence that things will progress here much better than Brazil.

We did some back of envelope stuff and here is the end result.
"500 barrels of oil equivalent per day (boepd) of which 70% is expected to be oil."
To value this we went with the following
* 350bopd
* 150 barrels of gas
Its $7 for a 1000 cubic feet of gas there is about 5400 cubic feet of gas in a barrel which roughly works out to around $38 a barrel

To get the gas value or equivalent
150 x $38 = $5700

Oil value
350 x $70 = $24,500.00

oil equivalent value plus oil value
$5700 + $24,500 = $30,200.00

Total value divided by daily production
$30,200.00 / 500 = $60.40 per barrel

So the $60 is what we are running through the DCF. After great debate we went with 2.5m recoverable dont ask why, it was just a number we could agree on.

Neither of us has a huge understanding of horizontal drilling so to play it safe we went with opex of $20 a barrel and a Capex of 2m

The end result for an unpinning NPV with a 20% discount was $14,294,980.81 or around .08c a share on a 49.22% working interest. Due to the lowish cash flows the IRR didn't like it at all

Ok not huge but its cash flow and its a start and if we can get this horizontal drilling into 330 think of the flow rates, they will be huge. But we are still sitting on some risk with this because we have no idea how our Brazilian JV partner will react and whether they will embrace this technology.

Interesting days, weeks and months ahead

Good luck guys

cheers

ciggys