Nice work PJ, conservative & well laid out projections.
Tons of variables to contend with, like life itself. Of course, even 2P of the full estimated amount
of 2C 330mmboo will take time to "bank", should she flow nicely over the short period of testing.
Some will still be allocated a 1C rating, some 3P, some 2P, not sure exactly the process of how/when
reserves are banked. My understanding is some of that will eventually be upgraded to 1P after
production is in train & she has flowed for a considerable period of time like 6 months. Need
extended flow under production conditions to guage the true reservoir quality, pressure regimes
and decline curves {If the reservoir is near anything it is touted to be then hopefully no decline
for the first 3-5 years at least}.
What will be the POO at the time? What will the flow rates be? What value will the market ascribe
to our 2C of 330mmboo being converted to 1c/2P/3P reserves? Will "Bellatrix" open up a new
discovery & play on the shelf? And of course......will it all come to naught?
My personal expectations would be thus if all falls into place.
POO @ time of flowing testing BOTH appraisal wells = $50 Brent.
The 1st & 2nd appraisal wells have confirmed the estimated target of 330mmboo 2C.
This has been banked as 2P & 3P reserves.
FAR net 2P = 22.5mmboo {@13.7% WI} FAR net 3P = 22.5mmboo.
2P reserves IGV @$10 3P reserves IGV @$7.50-- SP valuation for SNE = 0.12cps
Bellatrix {I hope it is the confirmed exploratory well} comes in @ Net to FAR of 23mmboo 2C,
valued @$5 a barrel or 3.5cps. All 3 wells then.....15.5cps.
Total SP then = 15.5cps @$50 Brent, base case valuation. No allowance for "thin sands" hopefully
being able to add 30% or a further 13mmboo net to FAR = 0.035cps. No allowance for Kenya,GB
or WA assets. No allowance for cash on hand {we will be out of $ by then anyway or be further
diluted or organising a debt facility or organising a partial sell-down of Senegal to continue A&E}
and no allowance for some hubris or some further cream being added to the SP in expectation of
a much firmer prospect of a T/O. No allowance also for Bellatrix {if it is the confirmed target} if
successful, of proving the "flat egg" theory and widening the initial 2C of SNE @330mmboo to
670mmboo---killing 2 birds with the one stone if you will. Bellatrix if successful, will surely
make the "string of pearls" on the shelf shorten in odds as a reality, rather than a possibility.
In all reality, I think time is running out to expect >$70 oil come November/December 2015.
I just hope it is a "respectable" figure of >$50 thereabouts. It would be a travesty if, as some have
touted, the POO is $20 at the time. Time is also running out for that figure to be realised as well,
surely.
So, hopefully a "respectable" if not great POO at the time if the above plays out. Apart from
anticipated success in regards to the above scenario, a shocking POO will make it much harder
obviously for a stellar run of the SP, harder to raise debt or dilute at a "fair" price and harder to
gain a "fair" price of any sell down of our Senegal asset in order to continue further A&E. Not
to mention a "fear" of selling out at an undervaluation relative to the future.
Probably getting way ahead of myself here and rambling on a bit, but those would be my
yardsticks if the "plan" unfolds as such.
"In preparing for battle I have always found that plans are useless, but planning is indispensable." - Dwight D. Eisenhower, D-Day 1944.
GLTAH
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