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I've revisited the last presentation, for I think the 4th time! It may be worthwhile taking another look at slides 8, 9 & 12, and making sure that we understand the potential value of PRD just in the near-term Morocco assets. Please bear with me while I string together the different bits of information.
Slide 8, bottom right, shows 2 very interesting numbers – an NPV10 of $215M, which is for the net to PRD of 295 BCF (75% of the gross 396BCF to the right, red section of bar chart) which represents the best case (i.e. most likely, NOT the most optimistic case) for the combined output of MOU-1, 4 & 5. Above the red 396BCF bar section is a 426BCF number, purple bar. That represents best case for MOU-2,3,7 & 8, as indicated on Slide 12, as well as including the deeper Hoot Sands in MOU-4 & 5 shown in yellow at the top of slide 9. Multiply that by 75%, and you get 320 BCF net to PRD. So the NPV10 for all the MOU numbered prospects is around $450M.
Remember, an NPV is what a project is worth TODAY, if all goes to plan, and assumes cost of money at 10% pa, and includes all capital and production costs. Our current market cap in USD is $22.6M (£16.5M market cap at USD:GBP exchange rate of 1.37), and with near enough 300M shares in issue, current share price of 5.6p, or 7.7c.
So the NPV10 above of $215M is worth $0.72c, or 52p per share.
The NPV10 above of $450M is worth $1.50, or £1.09p per share.
These are not values for some far-off concept - they are for a project that is planned to be producing gas at the end of next year.
Looking good? We're not finished yet – I did say bear with me! Neither of these numbers include the newly-revealed MOU-NE. There it is on the right of Slide 9. It's huge -105 km2, over 200m of potential carbonate reservoir. The MOU-1,4 & 5 prospect has a total area of (only!) around 35km2. Anyone want to take a guess at how many BCF (or even TCF) are hiding in MOU-NE? Or its value?
Of course, it's only a very small part of the 7000+ km2 Guercif licence. As GRH has stated several times, at the current share price this is just option money. Please remember to do your own sums - I have frequently been known to be wrong, occasionally very wrong :-(
Astonishing figures Keith . Very grateful for your efforts. You have to hand it to GRH for his steadfast and generous advocacy in this matter. I won’t be alone in feeling a significant debt to others on here.
Hi KeithOz,
Very good analysis, as usual.
They put some hard numbers on the table.
Data, if you will.
Of course, there are no guarantees.
But the numbers look attractive, probability-weighted.
Some other clever people on here have also run some seriously reserached DCF's to get NPV's that are actually quite well to the north of your numbers.
We won't know exactly who is right until the ship actually comes into port but it would certainly seem to me, from your analysis and others', that there is quite some substance to the VALUE of this stock.
Even if the current SP does not reflect it.
I suspect we may see some degree of the SP starting to track back to a correlation with VALUE.
KeithOz,
I have always believed that PRD is different to most listed companies, and especially tiddlers.
There are several reasons for that belief, including quality of assets, the deminstrated force multiplier effect on small amounts of capital, the fact that the leader has a big stake in the company, etc.
But a big factor was always that this thing much more resembled a private equity investment tan a normal listed stock.
So, in DCF terms, the terminal value becomes critical - and the time frame within which it is likely to be achieved (time-delta).
Most listed companies do not have a terminal value - they just keepr rolling on until they stop rolling on.
PRD does have likely terminal values on all 3 assets (there may actually be even more than 3 assets but let's keep it simple).
The terminal value is the price at which the assets are sold.
So, this situation is much more similar to a private equity (PE) deal than a listed company investment.
And, in most situations, the PE players do way better than the asset managers playing the public markets.
But they also risk much more direct cash.
Here the VALUE:cash invested ratio is way, WAY, below PE deals.
That is why this whole PRD situation has been so interesting to me.
And I am not commentating just from the peanut gallery. I have a pretty decent slug of shares here.
So, if I am wrong, it will be more than a bit painful.
I think it unlikely that I am wrong.
Good evening Keith Oz ...
Apologies for late reply.... I was short on time when you posted and took a mental to recheck the September investors presentation as your numbers differed to what I had in my head ...
I've got a few days vacation and be using some of that to go over the various presentations again ...
My interpretation of NPV10 US$215M is it uses as it's principal factor of flow rate and not volume.
Slide 7 (yellow box) shows (to me) that the stated NPV10 is achieved at 25M cfgd ....
and that the flow rate is scalable up to 83M cfgd .... these are profiled examples as I understand to provide example net cash if/when those flow rates are achieved over a set time period .... 10 years in the examples.
Happy to be corrected as every day is a learning day :-)
ATB,
Vegas
Q20: If as you state the share price was over heated in the run up to MOU-1 drilling completion does that mean you feel that PRD was not worth a Market Cap of ~£45M
I think it was exaggerated for that time. Following the well it is a valid market cap figure given the well results and dramatic increase in the price of gas. We have a 7,269km2 licence area and are drilling less than 5 kms from the Maghreb gas pipeline to Europe. We have no debt. MOU-1 opened up a new gas basin. CNG is economic at 5 mm cfgpd. 1 bcf currently can generate US$ 11 million gross revenues - even before the spike in gas prices. NOW the market cap can be under-pinned - before MOU-1 it had a greater speculative element.
Can't help but think our JV in Morocco isn't too far away :)
Hi Vegas - I agree that this figure of $215M appears to be the NPV10 for the 25MMcfgd scenario which was RNS'd a while ago, presumably as an example of what a potential joint venturer might want to offtake (aka Michael Caine). About a month ago I made my first attempt to calculate the NPVs of the different production scenarios. The problem with this methodology is that the NPV & IRR are increased by pulling production forward, but also decreased by additional upfront costs and lower terminal value - that is highly dependant upon what assumptions you make on depletion rates.
Because of this range of unknowns, I decided to base the latest set of valuations on the potential volume of gas in place multiplied by the PRD-calculated NPV. I agree that just because you have twice as much gas you will not make twice as much profit, and that is partly reflected in my amateur calculations. Quite simply, we don't have nearly enough information to make an accurate forecast, but we do know enough to see that even in a very conservative case, PRD is currently significantly undervalued. We can revisit after the 3/4 flow tests!
Thanks for your reply Keith Oz ...
I do agree that we don't know enough information or have enough data to make close to accurate valuations and also agree and to state the obvious (to those that have done their research) PRD is significantly undervalued.
My own calculations don't differ that much from a certain Mr MC ..... further if MOU NE does contain charged HC in the oolitic and are excited to reach surface in the Darcie's well Mr MC will be but an am dram ..
GLA,
Vegas