a fundamental input into the reserve certification process is the cost of production and development. reserves are a commercial statement. Otherwise the 'resevres' will sit in a contingent resource i.e it is contigent on a certain factor or factors to be present in order to get the resource across the line into a commercially bankable reserve category.
There are two very distinct factors at play between a Cooper shale and Bowland's. Namely distance to market - this sets the cooper at a substantial price disadvantage for the relative cost of production, not just for the transport of gas (~$1-1.50/GJ to market) but the logistics of setting up camp in the desert (which mind you also redues land cost and challenges whilst planning). The other is the price of the gas market in the UK which is subatnaitally higher than in the East Coast of Australia.
Based on that alone, the Bowland could come in at about double the raw prodution cost (i.e just getting it out of the ground) and still be profitable.
With respect to any potential farmin to Cuadrilla, which I am somewhat astonished at, it would be very interesting to see what they come up with.
My expecattion would be for some kind of capital down payment for back costs and a staged deal based election to particpate over several stages. The prospect is simply to imature to be considered a saleable developed prospect. They are still at least 2 years away from that point, and a good 9-12 months off getting reserves at the current rate of progress.
The majors have money but they aint stupid either, despite there being multiple examples in history to suggest otherwise.
Cheers,
SF
AJL Price at posting:
$1.63 Sentiment: Buy Disclosure: Held
