solimar, page-3

Realistically? The way I look at it the Solimar purchase reduces the reliance on a "one strike" strategy in that there are several other interests aligned with that purchase (which is more of a merger, when you have a look at the details). With the Ventura field, there was always an expectation that drilling on the existing well may not bear fruit - as Livingstone management mentioned, it was expected that they would have do drill one or two sidetrack wells, and this contingency was built into the budget. Yes, it would have been nice to hit the pot first time in, but realistically it was more of a long shot. The placement of the second sidetrack well should, based on what we know about the field, produce some results (the only question in my mind is not really "if" but "how much" - that is, what is the capacity once the sidetracks hit, and is this capacity in line with their original forecast).

If (a big IF) the sidetracks both fail (I believe they are looking at two at this stage - please correct me if I am wrong) then LPL falls back to the other Solimar projects. I believe that some strength has been gained through this purchase (they have effectively bought themselves a part in several projects, albeit Ventura is the largest possible "kicker" at this stage). From a price perspective, the run from 11.0 to 28.0 appears to have been on the back of two things - (1) the Solimar merger in its entirity, and (2) specifically, the Ventura well(s). The SP has already declined by almost 50% from its hights (28.0 back to around 20.0) and seems to have rather deeply discounted Ventura. My guess is that if they "do a CRJ" (those poor guys at Copper Range look like they will be producing marble benchtops for the next 20 years!) and have a series of dusters, then LPL will lose another 50% of the recent gains. In other words, a duster on Ventura may see a 5 cent fall to 15.0. The way I look at it from here - my estimated downside is 5 cents, but my upside is far greater than the 8 cents to the recent high (if they come in on budget my NPV model tells me that LPL will hit around 40 cents on a decent strike at Ventura).

So the simple maths (using a thumbnail dipped in tar) is - (A) Ventura comes through = +50% on current s/price, or (B) Ventura is a duster =-25% on current s/price. This 2:1 ratio also sounds about right.

(All humble, Tibetan-monk-inspired ramblings - suggest you do your own research etc.)