valuations

WHL Energy Ltd
WHL ENERGY LTD
Independent Expert Confirms 3.4b Barrel Potential
WHL Energy Limited (“WHN”, “Company”) has reported the results of an independent review by Netherland Sewell and Associates Inc (“NSAI”) for the Company’s 100% owned acreage offshore Seychelles. The review of the top 21 leads, as identified by recently acquired and interpreted 2D seismic, has indicated total unrisked Mean Prospective Resource of 3.4 billion barrels of oil (potential recoverable oil). The P10 potential recoverable volume is in excess of 8 billion barrels of oil.
Significantly, the potential of the Beau Vallon structure has been confirmed at 992 million barrels of mean prospective resource.
Several less mature leads were not included in the independent review but remain prospective and continue to be internally analysed by WHN.
Valuation Implications Positive
The NSAI numbers are lower than the internal WHN numbers released several weeks ago due to differences in assumptions around recovery factors. Despite this, the more conservative NSAI numbers are huge and strongly support a case for a farm-out to a high quality industry player.
A risked valuation on Beau Vallon alone is 13cps (assuming 30% post farm-out working interest, POS of 5% and $15 NPV per bbl). The unrisked upside potential for Beau Vallon is estimated at 268cps. Importantly, internal estimates of probability of success (“POS”) average closer to 10%.
NSAI is well regarded and the report should be received positively, particularly in industry as well as in foreign markets.
Avana Takeover Has Positive Look-Through Value for WHN
Avana Petroleum recently entered into a Heads of Agreement with CAMAC Energy Incorporated (NYSE AMEX:CAK) to be acquired for $15m in common stock. Avana holds a 25% interest in 15,000km2 offshore Seychelles as well as a 10% interest in Block L9, offshore Kenya (5,110km2). Using a rough per km2 valuation implies look-through for WHN of $72m; however, WHN has 100% ownership and operatorship of its acreage (20,476km2), which should command a premium of at least 30%. Using a dollar per barrel of prospective resource metric for the transaction implies look-through for WHN of $450m (assumes 464 million barrels for Avana’s Seychelles acreage, 1 billion barrels for Block L9).
Farm-In Parameters Looking Good, Portfolio Diversified
WHN’s Seychelles farm-out continues to receive significant interest from major international oil and gas companies and whilst these companies conduct their own internal analyses, the NSAI report provides an additional level of comfort. The project ticks important boxes required for successful farm-out including: large prospect sizes, shallow water, favourable fiscal terms, large equity position, large acreage position, evidence of hydrocarbon generation, underexplored area and regional increase in industry interest. We remain confident that a farm-out will be achieved over the coming months.
WHN has also recently diversified its portfolio with the grant of block W10-25 (WHN 33%), offshore Western Australia. The block is located on the North West Shelf and is interpreted to contain 20% of the 13 trillion cubic feet of gas Palta Prospect, which may be drilled by Shell in early 2012.
We continue to rate WHN as a Speculative Buy with a price target of 12cps.
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Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000