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And thanks Mogger. Wonder if the southern hub could also mean accessing a bit of what was phase 2 oil during the phase 1 drilling. If so then hope RKH are protecting their 60% share of that!
'Nov' should be NPV
On the face of it the comments mean the southern hub brings forward oil production, perhaps extending the initial plateau - so increasing the NPV. Excellent that he says 'very much increases' Nov!
Also is the case that a southern hub is adjacent to Phase 2 and therefore will indeed make phase 2 easier to do start quickly and efficiently. Intriguing.
All sounds bloody brilliant to me.
CitizenTS
TD stated in his presentation...
"We've added a southern drill center. Of course there are an increased number of wells that does increase the pre-first oil CapEx to about $1.8 billion but it very much increases the NPV of the project. It reduces the cash breakeven. I think it also reinforces the value of the project at the P90 level, which is important for the lending -- for the lenders of the project."
https://seekingalpha.com/article/4287445-premier-oil-plc-pmoif-ceo-anthony-durrant-q2-2019-results-earnings-call-transcript?part=single
There is a picture on page 20
http://www.premier-oil.com/sites/default/files/presentation/2019-hy-results-presentation.pdf
As I understand it, the lenders have asked for it
Mogger
rpoodle - Yes, noticed that too. Very interested to hear back anything you get. With phase one upgraded to 250mln maybe phase 2 is upgraded too. But that 330m (was it?) net to Premier may suggest a materially bigger upgrade to phase 2.
Also the capex to first oil has gone up from 1.5 to 1.8mln if I have that right. What is that about? Infrastructure to bolt on a much expanded phase 2?
Have always thought, and said so here, that a farm down should bring phase 2 forward as a farminee brings cash to do some things in parallel rather than serially. A farminee will want that too as they will be paying pretty mucha fill wack (modelled) market value for their interest in phase 1, plus something more modest for the rest but really the subsequent phases provide their upside.
Phase 2, and the scale of upside that brings, is coming in to view! And work to appraise phase 3 (Isobel etc) would also be brought forward a few years.
Oh, and another new source of uncertainty. Premier, in their results, say that Sea Lion has “around 330 mmbbls (net to Premier)”. But given that Premier only have 36% in license 4b, Rockhopper at least have long claimed that the field is basically a 50:50 split. And Rockhopper’s CPR said the field is 517m barrels. So either Premier are exaggerating their percentage share, or are saying that the field is in fact more like 660m barrels. I’m looking into some of these matters at the moment and will post any info I can get...
However, all this helps to explain all the detail that needs negotiating/sorting before FID/sanction.
As I’ve said for a long time, in a pristine new region, there’s a lot to be done before the starting gun is fired, so with everything else to consider, those who are surprised by delays are not thinking clearly.
The number of know unknowns are frankly off the charts at the moment. Here’s a few more raised by Premier’s Thursday update:
1) now that the amount to be produced in phase 1 is 250m barrels, what’s the updated production profile? Higher peak production? Longer peak plateau?
2) will there need to be a tweak to the FEED for the updated plan (bloody well hope not)?
3) with a farm-in for Premier, what’s happening to Rockhopper’s $337m carry for phase 1 (let alone it’d $337m carry for phase 2)? Would a farm-in pay some of the carry? It seemed under the prior plan Rockhopper would only get $120m of its carry; what was planned for the rest?
4) is Rockhopper looking to farm down any share as well?
5) what’s the new equity/loan split for financing?
6) are FIG going to update the royalty/corporate tax regime?
And that’s all before we even start thinking about Ombrina Mare....
It’s relatively straightforward to come up with a possible share price for peak production (north of £5 a share, on an assumed PE ratio of 10ish, an oil price of $65/b and debts of under $400m) but, as was mentioned, the vast number of hugely important unknowns makes it no more than an academic exercise.
Industry averages mean nothing in this business because they are exactly that; averages. The different in the circumstances of each case can lead to vastly different valuations.
Determining a nominal value of Sea Lion Ph.1 (today or at some point the future) is at least conceptually possible (analysts spend their whole days doing such things), but again massively dependent on the variables, so when in comes to E&P companies, pick a value you want and then justify the assumptions that get you there.
Then you have that nominal value, but what does that mean per share? That depends on the number of shares clearly. Will Sea Lion Ph.1 happen, but RKH goes bust beforehand, or there is a major dilution? Alternatively, will RKH get a massive payout from OM and buy-back 90% of its shares?
Of course, you also have the fact that there are "known unknowns" like a farm-out and a final negotiation of the terms, that could materially impact even those variables we know about.
So, to cut a long story short. If Sea Lion Ph.1 goes ahead and RKH avoids and dilution prior to this point, the shares should almost certainly be a good multiple higher than they are today. Trying to be any more precise than that is pointless.
GS
Silverfoil13.......I think it could be £20 or .....................................20p. Best to ask Much he is good a calculating these numbers ,or you could ask Garbled or Bluehorseloveschipfat and get an entirely different slant on things!
So there is an estimated 250 million barrels of oil at SeaLion and annual free cash flow of $1.5 billion; if they go to production can anyone estimate the likely share value for RKH based on those numbers and industry averages?