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According to the AEX recent CPR, the company holds 57.4% of the 1.94 BCF estimated reserves at Killiwani N. However, if we were to make the assumption that the contingent resources of 80.6BCF pending development can be turned into reserves following a successful NT3 drill, approval of 25 year development license, a gas sales agreement and TPDC building a gas pipe-line to the gas processing station at Madimba. Then these resources could be turned into reserves some time in a not too distant future. In such case AEX would have about 61.5 BCF in reserves (75%*80.6+57.4%*1.94). AEX current market cap is about 150 MUSD. Now compare this valuation with WRL's current market cap of about 73 MUSD and reserves of 176.4 BCF. Less then 50% of AEX market cap despite having reserves that are almost 3 times as large and that assumes that AEX contingent resources pendent development can be turned into reserves. My message is not that AEX is overvalued, but that WRL is grossly undervalued.
As always, an excellent post HY and could not agree more.
Unfortunatey, I do not fully agree HY. While I agree that WRL is undervalued,and I do indeed expect a recovery relative to AEX, I do think that AEX is significantly overvalued. As long as AEX assets are stranded, a comparing reserves with WRL is simply misleading; you are comparing apples with pears. The AEX share price has little to do with it potential reserves, it is mainly based on false expectations and hype, in my view. WRL on the other hand is a forgotten share, and currently something like a phoenix rising from the ashes. It will take a lot of time still before people realise what the potential is of this company. So overall, I don�t think we should expect that WRL will ever reach a price as high as AEX has been in the past. I expect that WRL will slowly and modestly increase in price, while AEX will gradually decline.
My expectation is certainly different mick. I expect AEX with the upcoming NT-3 drill and of course the execution of the development plan as delivered by GE & the 25 year development licence to do very well. I also expect that WRL may well also do very well this year, pending the relocation and more importantly developments @ Mozambique. Good luck to both, but then I would say that.
cperkin; As I see it: - Problem one; Aminex has huge upcoming expenses before they can commercialize Ntorya. More drilling + local infrastructure and local processing facilities is very expensive. Ask WRL shareholders... - Problem two; The waiting time before TPDC will see the benefit of and have the money to finance and build a pipeline to Madimba. - Problem three; Will TPDC finance a pipeline to Madimba without claiming a (20% ?) share of the license?
Problem 4; the Tanzanian Natural Gas Utilisation Master Plan, issued summer last year, foresees a pipeline from Mtwara to Njobme (phase 1, see page 40-41), which will essentially pass by Ntorya. While some irrational decisions can always expected from TPDC, I very much doubt that they are mad enough to build a temporary pipeline for ~30 mln, which will be used for a year of 5 perhaps.... Much simpler would be to finally pay some outstanding Orca invoices, after wich Orca will surely be very happy to supply them more than Ntorya can even deliver!
Well you see problems and I see opportunities gents, the SP will speak for itself over the next few months I am sure. All of these points have of course been covered in the devlopment plan and 25 year development licence application (if only we had a copy ;)) and I am sure the Zubair corp will have some influence in delivery. Have a lovely weekend.........