I have a lot of respect for CE given how far he has come from a very humble upbringing. Hence why I am a MIN shareholder. I also find it laughable that some analysts are questioning his ability to manage their balance sheet. That said, he didn't get to where he is today but revealing his hands. Judge a person by their actions, not words. There are two ways to interpret his stake in WGO at just under 36cps (c.$2/GJ). Either he was helping GR to defeat STX while making a quick couple of million for MIN, or he saw an opportunity to consolidate his PB dominance by acquiring reserves at a price he deemed to be attractive. If the latter, then he can acquire even more reserves at half that unit price he paid for with his WGO stake. Truth is nobody really know his true hands until he reveals it, so it's still up for debate whether he will make a move for STX or not.
The potential free water invasion issues at SE2 and SE3 can be due to a host of possible reasons. This is the most insightful and relevant article I've found to date - https://www.hindawi.com/journals/mpe/2021/9075560/
I've personally written off the recoveries for SE2 and SE3 for now, but that doesn't mean I think there is no recoverable volume from those 2 compartments. As an objective investor, I prefer to assume the worst realistic outcome. So I have assumed a 20% COS for the commercial recovery of 50PJ from those 2 compartments.
Under that assumption, SE will not be a standalone development. The elimination of the SE production revenue stream leads to a 28cps reduction in my DCF model. I had also changed my model to use average realisable gas price instead of spot price (my bad) which also knocked 21cps off the valuation. Hence my DCF has reduced from 91cps to 42cps. Pls note I am still reviewing this.
In my updated modelling, I have indeed assumed SE gas will be fed into a joint processing plant to be shared with GR as that development pathway is the most commercially logical one. As we are still the operator, we still have the key advantage of determining the final development pathway. So it is still possible for us to build our own plant to process SE gas and our share of WE gas while GR pipes her gas to MIN for processing, but I can't see that happening as it doesn't make much commercial sense.
Does it make us less attractive to other potential bidders? Maybe. At the end of the day, STX still has a lot of gas with full operational control over all of its tenements, including GR's 50% of WE. So it is still a very attractive takeover proposition, especially at current depressed price levels. Logically, I think it has narrowed down to those with existing PB exposures because of the synergies that can be extracted from consolidating reserves and centralising processing (which will reduce unit cost and remove duplicating OPEX).
Hope my thinking makes sense
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