re: significant gas shows have already been hit The Wombat...I...

re: significant gas shows have already been hit The Wombat...

I think you misunderstood...

"...suggested the most likely outcome would be for the well to be closed up until more wells are ready and a gas gathering system is put in place. Given this and the time required to engineer, source & build a pipeline & manifold etc, I wouldn't be expecting any gas sales in the near future. It may be possible to produce oil into tankers if there is enough flowing..."

My files (from the Utah state archives) indicate the well will be "shut in" in the case of a gas discovery due to there not being off-take infrustructure (pipeline) in the immediate vacinity...ie, a pipe is not on the well site.

The "shut off" is actually referring to the period between discovery and when a pipe can be connected to the 26 inch Williams state pipeline that crosses the North-West of the lease.

I believe this is already being sorted out.

Using the right of way currently being used for the road access (which was the preferred route), the pipline will be approximately 10.5 miles (16.9km) long.

Although longer, this path is actually far more desirable, as it offers a pre-prepared access line, both relatively flat and readily available without the need for lengthy approval processes (including environmental impact studies)

There was no mention anywhere that production could not proceed as soon as possible, regardless of additional wells.

This is, in my view, a commercial well...however the field is likely to be significant, suggesting up to 6 or more wells may eventually be required.

At an assumed production rate of 4mmcf per day for each well...6 wells will result in some 24mmcf per day of total gas production, equating to a lowside net income to GDN...assuming this transpires...(based on $7.50 henry hub) of some $60m per year, less production costs, which are pretty low for gas.

Oil of course will be a bonus.

So...assuming it will take 1 year to achieve this outcome...and say $30m worth of dilution (at say $1.20 assuming commerciality is confirmed)...then in just 12 months (lets say 18 months), GDN may well be looking at something like 27c net profit per share, per year.

The above production will use up some 9bcf per year...so a 100bcf reserve should see a minumum 5 years maximum production, with declining production levels kicking in for the next 15 years or so.

On this basis a PE of 10 would not be out of place, suggesting $2.70 on say a 100bcf field.

The bigger the field, the more wells likely to be required...although once say a total of 6 wells are on the grid, further drilling can be self, funded meaning no more dilution.

It must be remembered however, the market tends to reflect future value in today's prices...as such, as soon as such a plan gets telegraphed to the market, an appropriate level of interest should ensue.

It all comes down to the total endowment...obviously more than 100bcf will see higher prices.

Cheers!