why is ggp running ??

I thought it appropriate to give a run down on why we are finally running hard

Firstly – Best reference announcements
I would use the following announcements to get a good snapshot of the company direction –

11.4.2011- Wolfberry Trend Development Presentation
30.11.2011- Chairman’s Presentation pack

These 2 give an over view of the original lease and expectations, combined with the near term drilling goals to 30.06.2012

Add to this

9.12.2011 Where Well #6 flowed at 367 barrells Per day

In summary The Permian 8806 acres was Bought In Q1/2 this year with –

1. P1 of 4 mil barrels of oil
2. A potential for 12 mil barrels
3. Up to 110 Wells
4. 99% success rate in the Wolfberry/Permian combination
5. Avg flow Vertical wells 136 BOPD
6. Avg Flow Horizontals around 500 BOPD
7. Avg Barrells per well around 100 – 125 K barrels

So Why is it running ??

Well #6 showed 250 K barrels flow rate of 367 BOPD ( Plus gas )
Well #8 has shown even stronger pressure so far

Near term well program is 10 wells by Mid 2012 ( done or underway)

Let’s review what this potentially means -

When you look at there development timeline , it is clear the drive is toward achieving maximum value prior to option expiry ( 31.8.2012 Strike price 8c )

Yes - There could be delays, but as presented in the AGM, we get 10 wells on production by July

6 Verticals
4 Horizontals

If we take averages for the area, we end up with

6 * 136 BOPD
4* 500 BOPD

= 2816 BOPD

at US $90 = $253,440 pd or $92 mil pa

Allowing a fully diluted position at say 2.8 bil shares we are trading at a MC of $58 mil !!

So fully diluted after current share placement we a trading well below our potential income stream that will be in place by July 2012

Looking Further ahead -


Firstly - Assumptions

1. 10 Wells drilling by August 31.2012 with commercial production confirmed (6 Vertical. 4 Horizontal)

a. Verticals at 136 BOPD
b. Horizonal flow 500 BOPD

2. 75% royalty interest

3. Costs net of royalty 25%

4. Oil price $US90 Barrell

5. - Gas sales left out of equation

6. Existing production outside Wolfberry to continue to support Admin costs

7. Full CR done in one hit after the results of #6 & #8 flow tests are confirmed as commercial

8. Cap raising done at a 1.7 c SP, reflecting a 1c discount to market

10. P/E ratio set at 5 times net profit



Firstly - Income

6 wells at 136 BOPD ( Total 816) = $73440 per day
4 wells at 500 BOPD ( Total 2000)= $180,000 per day

Total income PA = $92.5 mil

Less royalty interest = $69.375

Less 25% costs = $52.03 mil

AT 5 times multiple = $260 mil

Asset cross check

10 Wells per zone at 200k barrells

12 zones in total acerage = 24 mil barrells

Initial estimate suggested total oil for lease at 12 mil barrells

12 mil barrel at $25 oil in ground value = $300 mil

Stand alone asset check - 10 wells at 200 k = $50 mil for this first zone alone ( assuming $25 oil in ground value)

Add oppie cash of $55 mil

Plus a further 7200 acres of potential P2 reserve, based on drilling results on first 10


Now cross reference to share issue -

Shares on Issue (ASX: GGP) 1,761,952,688
Oppies $0.08 679,100,395

Convertible notes 18,200,000 = 45,000,000 shares
with $0.05 face value,

Total shares on issue fully diluted = 2.48 bill shares

Add $7* mil at 1.7c = 407,000,000 shares

Total shares on issue 2.887 billion ( assuming oppies convert in the money )

Market Cap $260 mil divided 2.887 bill shares = 9c

Oppy strike price is achieveable, as is a good return for shareholders


Above numbers are based on results in line with area rather than actual results

We have one well already at 367 barrells, with a second confirmation of #8 due shortly


THIS REALLY IS SHAPING UP NICELY FOR SHAREHOLDER"S AND OPPIE HOLDERS IMO

Additional Notes

GGP hold other assets and cash flow which is progressing also. I have not included for this reference