Excellent numbers and a great way to start conversations around potential valuation and indeed as @Pottermore says, to highlight to the many retail other shareholders what NWE's potential future worth could realistically be.
As you know, it can be a lot of fun playing around with assumptions and variables, but always wise to be conservative as you have been. Having said that I do get excited when you plug in some of the "higher" numbers we have seen in the market i.e. dom-gas PJ prices (both east & west coast), LNG netback prices and of course oil price. FWIW I have done some rough & ready, back of the envelope numbers and like yours, they look quite astonishing. Hence why I am very comfortable sitting on the position I have... and why I believe we have been seeing the trading activity of late. 4c is ridiculously cheap considering the future value of our world class assets.
The model will need some tweaking as we get a better idea of expected initial 2P reserves, as well as factoring in projected capex / opex spend and specifically what is the likely gas processing capacity (more on this below). Projected asset life will tweak DCF and NPV valuations... will be interesting how this evolves as NWE firms up further gas reserves in the years to come.
I regard BPT as a great comparison to look at when doing some calcs for NWE. BPT are currently in the thick of significant capex spend for their Waitsia development (sorry I don't recall the $$ capex budget)... they are building significant infrastructure and also have commenced a 6-well drilling campaign to extend Waitsia reserves. Some things I would note:
BPT has an established 40TJ p/d gas processing plant, and are currently building a 250TJ gas plant (IIRC). Assuming NWE/MIN were to also build a 250TJ per day processing capacity, that's 250,000GJ p/d, at your assumed $15GJ price gives you ~$3.75m p/d... or $1.37bn p/a gross... ~$275m p.a. net to NWE. I would also note that MIN has (as part of the EGO acquisition) holds the Red Gully gas plant, which although relatively small (8TJ p/d capacity?), would allow some immediate cash flow opportunity without significant capex.
Re assumed GJ price, lets see what BPT starts reporting next year when their 3.75mtpa LNG export contract commences... We can plug this more realistic number into a more detailed DCF model.
re Asset life, BPT has 2P reserves of 1,166PJ... assumed processing 250TJ per day, gives you a ~15 yr field life. So... if NWE/MIN can establish 2P reserves of at least that but IMO could be 2,000 - 3,000 PJ or more across all NWE permit prospects, then projected asset life for NWE/MIN could be in the range of 27-40 years (assuming other variables remain same). Pretty amazing really And remember the recent news that the NWS KGP is likely to have it's operational life extended to 2070... aligns well for the projected field life for the likes of NWE/MIN.
Price of oil... I love this one because like you I believe NWE will be finding some very nice oil accumulations, as indicated in the recent LD-1 drilling and as our geos have noted that we are intersecting the Dongara / Wagina / Kingia fromations relatively shallower than our neighbours down south... which bodes well that NWE permits can host an oil kitchen too. Current POO is $160AUD... but $80AUD is a good conservative # to use. I liken it to the WA govt's treasury assumption for iron ore at LT avg $66/t.... even though current prices are ~$140 to $150/t. IMO oil price will stay elevated above USD$100 for some time (barring a major recession)... and if you plugged $140AUD into your model oil revenue sits at $10m+. Easy money.
So that's just some initial thoughts. Fair to say quite a few IB's and bigger O&G players will be doing exactly what we are doing. And as you rightly say, forget the pips... I am also here for the longer term play and to see NWE make it into production. Make no mistake, there are some big returns to be made here... just reward for all the risk and stress of the past 10+ years!!
NWE Price at posting:
4.4¢ Sentiment: Buy Disclosure: Held
