Updated Charlie-1 target valuations Mean/Low/High, page-74

Sentiment is affected by oil price (spot and futures) and by macro uncertainties. I know you have been quite dismissive of the impact of Covid-19 both in terms of degree of impact and longetivity of impact, but the reality is that there is a great degree of uncertainty in the world about both, and that uncertainty is reflected in sentiment too. As is the balance sheet strength and mid term investment appetite of the potential partners required to realize the value of any discovered prize, given the turmoil in oil markets, in capital markets, on the oil demand side and on the oil supply side.

If the house broker valuation, takes these factors into account, then fair enough. But it appears that Cenkos are using a NAV of almost US$3/bbl (for liquids). While they have not disclosed (to my eye), the basis of this valuation, current share market pricing just days before we get LWD results, would suggest that the share market is either a) discounting that net asset value significantly, b) conservatively pricing most of the zones as failures; or c) deciding that the best position pre-drill is to ride the uncertainty with having no position, and then potentially acting on operational update news that provide clarity on discovery status. I suspect a bit from all three columns.

But potentially giving some weight to the third factor is the fact that many investors have had 4 + years and are now on their 5th drilling activity with this company on the Alaskan North Slope. And realize that the forced annual hibernation does provide multiple opportunities to take positions after the news (ie with lower uncertainty), which does place a potential cap on pre-drill FOMO, and potentially on success scenario post drill FOMO too. I hope not, but denying it will not make it go away. IMO.

So, while I would love to be proven wrong, I can’t see pre drilling results prices getting anywhere near the house brokers unsubstantiated (IMO) risked pre drill valuations. And the same would apply to post drill success scenario valuations too. Primarily due to the current macro factors.

Sentiment is everything prior to having any independently certified 2P/2C reserves. And sentiment cares about oil price and corona. As you said. Pushing a house broker valuation that blatantly disregards this is disingenuous at best. NAV, with substantiation, can come to roost when reserves are established.

One final point: the world is changing at a pace most of us have never seen before and a few days feels like a few months. In that vein, the Cenkos report feels about a year out of date. IMO.