Well.... there is some relevance. If oils continues to go up, do you not think any deals to find / extract oil would be more desirable? So the unconventional might be more attractive, as well as may place some focus to expedite current prospects.
The recent Next Oil Rush article makes for some pretty bullish reading, but I don’t agree with the author’s numbers. I’m ok assuming the conventional is c50% of Icewine, but not with the amount of 88E that has been sold, specifically : Area A, c80% of the whole conventional (2,400 MMBO of 2,896 MMBO), not 40% as in the article. The article mentions figures of 1.75% of 88E to be sold for an extra $15M - what the 1.75% is actually referring to is the potential (uplifted on success) value of 88E that PMO will pay for the additional asset, areas B & C, not the percentage of the asset. PMO have bought a 60% WI in Area A, which by my calculations is a bit more than 80% of the whole conventional (2,400 MMBO of 2,896 MMBO) On successful discovery, PMO can purchase 50% WI of about 20% of the rest of the conventional, in areas B & C (496 MMBO) This would give PMO 1,440 MMBO + 248 MMBO, which is 1688 MMBO. This is about 58% of the conventional. Also leaves 88E with 1,009 MMBO (not an inconsiderable amount…) Factor in the HRZ at very roughly the same size, and we have given PMO appx 29% of Icewine (conventional & HRZ). I’m assuming successful drilling and the take up of areas B & C, if its not successful then we’ve got bigger issues than percentages. I’m not dousing the flames here, as its probably quite a good deal – I would have thought that a farm-in partner like Conoco or Exxon would have demanded bigger percentages, but the articles numbers didn’t read right to me. Also, I expect the SP would have reacted better (short term) with a Conoco or Exxon named partner, although in time, better value may well be realised with this deal. To be left with > billion barrels of conventional is pretty significant – I don’t know how quickly this can be monetised, but on the previously quoted cost of extraction, there’s plenty enough for a massive SP rise. Lastly, DW’s comments of ‘a partner might get bored with farming-in and decide to just buy us out’ – I guess these won’t really apply with PMO. Can someone pls cross-check my logic, think I’ve got the numbers largely correct, but good to get another opinion.
I think it’s pretty easy to say what people should have done, once the event has passed, and the SP has reduced - in fact, if we all knew that, i’ll bet most would have sold and re-bought. Better still, sold, opened a short and closed it and then re bought.
The short position just leverages, it’s not a win-win, and a percentage opposing position will just reduce (gains or losses) - pretty straightforward. If The FO partner were to offer a full buy out though, and you have a large short position, trading may be suspended - that would be a nervous time!
Lef - your mail implies that Jiddy should have hedged his position, and protected his profit when SP was at 4p. Easy move to make you say, and it does make sense....well it does now. Can you just clarify how that hedged short position at 4p would have looked if the SP continued to rise, to say 15p, or 20p pls - my maths ain’t too good, nor is my hindsight. Rough calculations will do.
Given that any one of the 4 separate projects would (should) have a positive impact on the MC, and therefore SP, perhaps you should be looking at the probability of all 4 failing, leaving you with a good percentage of chance of success. Now what would that be, based on a 50/50 on each of the ‘projects’?