Member Info for blackstout

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Indulge me and let's Assume I'm right. If I am, I imagine we might possibly see 15 more bonds being converted into something like 38m bond shares and 40m derivative shares over the next couple of weeks or so. As we edge closer to positive news so their window of opportunity is closing.

Having said that, I think we're only likely to see around 750k shares or so being sold. Those being ones representing the 19% conversion fee. I think the rest will kept for trading as long as it suits

Just to say I've not seen any significant net short positions being reported. That's not to say there aren't any, just saying that I haven't seen them.

Of course I may be totally wrong with this piece, but I wouldn't be surprised to hear that COPL has renegotiated the terms of the March bond agreement with Anavio along with any minor bondholders* still holding their unconverted bonds*.

That could be quite a sensible move if there are limited options. It should be done in my opinion sooner rather than later. The original terms are skewed too heavily in favour of the bondholders and against pi's in my opinion.

Although I'm not in favour of it I think we might also see a revised tap facility in any renegotiation and it coming into play. As good or bad as that may be, I guess depends upon how tight COPL's current cash and short term cashflow looks against any alternatives.

Anyway If I'm near right as I say we should see an end to bondholders aggressive selling sometime mid week. Anavios forced position has created a huge short term buying opportunity in my view. The risk/reward ratio here is one I've very rarely seen.

As always just my take. My fingers are crossed it works out well for us all.

It's likely most of us may have thought yesterday's 30m sell in one transaction came from further bond conversions. Whilst I can't be absolutely certain I very much doubt that's the case.

I say that because we haven't received an RNS telling us bonds have been converted. Moreover the 30m shares sold at 2.24p which would have been at a considerable loss to the bond conversion price of 6.75p.

That said I believe there has been a distressed Bondholder selling at a loss but I think his final liquidation was the 12m+ sell reported late last Friday. So this is my alternative reasoning behind yesterday's 30m sell:-

A number of private investors in COPL were and perhaps still are are also invested in PREM, a commodity trader listed on UKs AIM market. I'm aware of that as fact.

I also have little doubt their positions until yesterday were leveraged in both stocks using Spreadex. As we know Spreadex holds more than 5% of COPL's shares. But how much more is unknown other than it's unlikely to be more than the next notification trigger which is 10%.

PREM had negative news released pre-market yesterday resulting in MM's dropping the stock by about 45% on the open. As trading continued through the day the SP ebbed and flowed, finishing around 41% down by the end.

As a consequence traders/investors in both may have needed to cover their positions and more than likely needed to sell down their holdings in both stocks to do exactly that.

Although I don't know how many investors were involved I genuinely believe that's what may have happened. It was "Contagion" if you like.

So in summary I think it may have been Spreadex who was the 30m seller and not Bondholders. It remains to be seen if Spreadex will need to issue another TR1 shortly.

As I see it COPL's and risk/reward ratio has improved if anything since my post last Sunday.

AIMHO

Re - post

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Spot Appraisal at Christmas 2023

Revenue. $/m $/m

6m bopy @$75/brrl. 450.00

Costs.

Private Royalties.

4.35mbrrls @ $75 x 22% 71.77

Federal Royalties.

1 65mbrrls @ $75 x12.5% 15.41

State Prod Tax

6.00mbrrls @ $75 x 11.6% 52.20

G&A, Debt & Derivatives etc. 40.00

Private Leases Prod.

4.35mbrrls @ $10 43.50

Federal Leases Prod.

1.65mbrrls @ $8 13.20

2024 Capex. 20.00

256.08. 450.00

(256.08)

Netback/Earnings $193.92m .

P/e of 8/1 = MC of 1551.36m & SP of $1.29/ 103p

Spot Appraisal at Optimisation $/m $/bn

Revenue

28m bopy @$80/brrl. 2.24

Costs.

Private Royalties.

4.00mbrrls @ $80 x 22% 70.40

Federal Royalties.

24.00mbrrls @ $80 x12.5% 24.00

State Prod Tax.

28.00mbrrls @ $80 x 11.6% 259.84

G&A , Debt, Derivatives etc. 40.00

Private Leases Prod.

4.00mbrrls @ $7 28.00

Federal Leases Prod.

24.00mbrrls @ $7 168.00

2024 Capex. 60.00

______________

650.24 2 24

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COPL has undergone a number of changes since I last posted. Some good and some not so good.

We've seen a continuation of high pressure problems and paraffin wax build up at the BFSU field along with issues arising from an exceptionally inclement winter storm over a prolonged period to name but a few negatives.

But for me the most dramatic change has been the change of COPL's shareholder base. Most of the shares are now sitting in bondholders and other ii's hands. Perhaps that's a consequence of the problems mentioned above and the difficulty in raising finance. But I'm not entirely not sure.

On the other hand the link below is to an article that paints a more optimistic and positive picture. It's been posted on here before but for those of you that haven't read it, here it is again. It's written by Charles Archer. Amongst other outlets Mr Archer writes regularly on Oil Price and Share-talk.

There's just one small schoolboy error in the article where he asserts the shares are listed on the AIM market which we know is not the case. Other than that I think it's an excellent piece and well worth reading to help to gain a balanced view.

https://www.share-talk.com/copl-shares-a-brief-look-at-the-value-disconnect/

As a LTH I'm generally aligned with Mr Archers' views, in particular "And unless I’m missing something critical, the market will wake up with a jolt". I firmly believe we're about to see that happen too.

FWIW in this post I'm going to try to expand on his reasoning by suggesting where COPL's Market Cap might be at two future milestones. At least on paper that is.

The first milestone is Christmas this year. The second I've chosen is when production in all units reaches an optimised and steady state. I have that in around four to five years from now..

I've chosen Christmas as the first milestone not just because it's the financial year end, although that's part of it, but because I believe the stock will be more on an even keel by then.

At the moment the stock appears to be under abuse to the downside by trolls and shorters and perhaps not least by Bondholders. It's all making TA and trading patterns difficult to understand.

In the not too distant future I believe the volatility is most likely going to get worse. But this time to the upside. To my mind it starts with the announcement of the JV. From there the SP is likely to be very unpredictable on a daily basis and I believe we may at last see the start of the trend change some of us have been waiting for.

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As we know there's a designed solution to the high pressure problems in the Shanon Unit in hand with COPL and it's minority partner CNOOC through its affiliates busily constructing a high pressure "Gas Gathering System" along with planned modifications to the inadequate surface equipment.

It's an engineering project that appears to be well thought through and being carried to me. I take comfort in that it appears I'm not the only one with that view given the States approval to flaring.

The State with the support of its own expert witnesses including engineers, environmental specialists and the like wouldn't have given COPL approval in the courts if it didn't think the remedial proposals and actions being taken by COPL were reasonable.

Without going into details and stepping through the "tie in" sequence well by well suffice to say the GGS should be complete and put into a phased operation in a matter of weeks.

So given the work going on and wearing my positive hat I see no reason why the BFSU shouldn't be producing less than 5000 bpd and 4250 bopd net to COPL by Christmas. That's my assumption in the appraisals that follow.

We also know that the Cole Creek recompletions are underway and they too should be fully operational and stimulated by Christmas too.

I think worthy of note is the very encouraging flow rate from the first of the wells. The readings were exceptional from just 61ft of perforations, unstimulated. I feel sure they would have have made both parties to the JV salivate and AM is known to regard them as "a game-changer"

So from the recompletions I have at least 1750 bopd bringing the CC and BFSU collectively to a production total of around 6000 bopd by Christmas.

Turning to the JV I'm in little doubt both parties are keen to enter into the agreement as proposed by COPL nine months ago. An approach that began with an expression of interest from the JV Party in or around September last year. AM then responded by confirming a like interest and followed that by issuing COPL's "Proposal".

From COPL's point they have the assets in terms of an OIP assessment and a relatively narrow skill set as its part. The JV Party who is said to be a big oil company on the other hand will have a much broader skill set and the added value to monetise the asset relatively quickly. I'm not just talking about cash, although that's part of it. I'm talking about resources to include drilling rigs and other equipment together with materials such as tubulars and the like.

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I don't want to get into carbon capture and the incentives it brings too much but I believe that it has huge potential and is a major attraction to COPL. It's difficult to put a value on it and possibly it's one of the reasons why it's taken so long for the parties to calculate the JV Party's added value.

It's quite obvious that at this early stage so much will be unknown by both parties and there will be so many variables it makes perfect sense for the "Farm- In'' to be phased. Albeit the JV Party will no doubt want as large a share as possible at the same time AM will want to protect COPL's position and hold on to as much as possible for as long as he can.

I may be wrong but as I see the JV having something like an 80/20 share mix with say a $50m to $75m cash payment by the JV Party to COPL to begin with. To me these assumptions seem reasonable but I imagine there'll also be a mechanism to increase the Partys' share at certain milestones be they production value or time. So I have assumed the share mix moves to 60/40 still in favour of COPL when production from the fields are optimised.

I needed to make an assumption to do my appraisals. If the initial share the JV Party receives is greater than assumed then the cash injection should be greater too. Therefore any changes to my assumptions shouldn't make very much difference to the assessed values.

Under the JV it's also not unreasonable to also assume there will be two drilling campaigns from the outset . First to delineate the field and establish bankable reserves and second to extract the OIP via stimulated horizontal production wells.

That said I think it's possible for the JV to complete four new wells in the FD producing 8_

-10k bopd collectively by the end of the year and that's been my assumption in the Christmas analysis I posted .

The OIP is thought to be much bigger than COPL's and Ryder Scotts assessment according to the JV Party. RS's assessment is bigger than COPL's, therefore AM's public statements on the matter are more than likely conservative. From my enquiries I see no reason to suggest recovery will be less than 50% of OIP so we're going to be looking at a recoverable quantity is roughly 1bn barrels, which by any measure is huge.

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The valuations based on $'s per brrl and the resulting p/e ratios should be higher than COPL's peers due to flow rates, the potential size of resource and not least of all carbon credits.

The JV will have very few abortive costs and no Federal tax payments all of which makes for a highly attractive development with high p/e ratios in financial terms.

AM will be well aware of the assets potential given all these fundamentals. Hence the resolution asking for consolidation. It should lead to wider/improved markets and along with a name change further enhance the value. 100/1 consolidation makes very little sense and 1000/1 make no sense whatsoever to me so I'm disregarding them. 10/1 maybe actioned I think if it's one of the keys to NASDAQ.

Production from the new discovery I have optimising in about four to five years time and from the fields under private leases next year. I'd like to see all LOF's reviewed to suit anticipated climate change/demand. No more than 25 years as a maximum seems a better fit and more in keeping to me.

Federal lease sales re-starting also fits the JV strategy of keeping data and a potential JV under seal under seal for now. As we know the new discovery has been kept under wraps from day one when the discovery drill was given a "tight hole" status and details have been kept under tight seal ever since. All for good reason I think.

There follows just a few notes and caveats to the appraisals that follow, some of which you will no doubt be aware of:-

The production figures in the "Optimised & Steady State" appraisal represents COPL's share in an annual production of approximately 120k bopd and 40m bopy allowing for downtime.

This in turn represents 60 - 80 horizontal wells optimising across the 51 square miles under Federal ownership. COPL envisages 150 wells at any one time across the same area according to the RNS issued last year

If all of the bonds are converted and the warrants/options exercised I have a fully diluted position of 1.2bn shares in issue. That's the figure I've used and it disregards any future buy-back.

Further details of the Derivatives I've referred to can be found in the M,D&A meeting minutes held on 31st March posted on Sedar.

Revenue from oil fields over 1 mile deep will be subject to payment of a Federal royalty which is 12.5%. Fields less than 1 mile deep will be subject to private landowners royalties which are much hlgher

at around 22%.

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State tax will be payable at a "special" rate given fracking will be adopted. The tax consists of mineral tax and severance tax but the overall rate is 11.6%.

It's most unlikely Federal tax will ever be paid given the value of "set-offs" brought forward from previous losses including those of Atomic. But moreover due to the Federal and any State carbon credits the JV is likely to enjoy.

Federal and State support is huge so permitting and approvals shouldn't be a problem.

For the purposes of the Appraisals I've assumed that the oil hedging due to come into place next month will be renegotiated and dealt with as it was six months ago. I've also assumed the SCF will be paid off with the cash injection from the JV Party on agreement. As I see it the banks lending criteria should be met by Christmas and the RBL brought in play. If needed at all.

Having researched the Sage Grouse and the potential disruption to production during its nesting season I no longer see it as an issue.

The Capex figure shown in the Christmas appraisal represents the finance needed to introduce more gas into the miscible flood and for further drilling etc. It does not include costs relating to the new discovery. I've assumed those will be met by the JV Party as part of his Farm-In contribution.

The Capex figure show in the JV appraisal represents COPL's proportion of the finance needed to cover all the JV's Capex costs to including but not limited to all drilling and infrastructure costs to maintain production in an optimised and steady state.

As I'm sure most of you know the price COPL received for its oil isn't quite the WTI price. However the price is relatively insignificant so I've neither discussed it nor accounted for it here. I've simply used $75/ brrl income in the Christmas appraisal and $80/brrl income in the Optimised one.

I am not a fan of using price to earnings ratios as a method of valuing stocks. P/e ratios are retrospective and should be used to compare like for like stocks on performance. I much prefer discounted cash flows. However in COPL's case there isn't sufficient information yet to apply an NPV calculation in my view. So I've resorted to using p/e ratios.

If you're thinking of "joining the dots" between the appraisals to get intermediate readings please bear in mind the connection will not be linear. More likely it will follow a logarithmic path, pretty much like a cars' acceleration to top speed.

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Spot Appraisal at Christmas 2023

Revenue

$/m $/m

6m bopy @$75/brrl. 450.00

Costs.

Private Royalties. 4.35mbrrls @ $75 x 22% 71.77

Federal Royalties. 1 65mbrrls @ $75 x12.5% 15.41

State Prod Tax 6.00mbrrls @ $75 x 11.6% 52.20

G&A, Debt & Derivatives etc. 40.00

Private Leases Prod.4.35mbrrls @ $10 43.50

Federal Leases Prod. 1.65mbrrls @ $8 13.20

2024 Capex. 20.00

__________________

256.08. 450.00

(256.08)

Netback/Earnings. $193.92m

P/e of 8/1 = MC of 1551.36m & SP of $1.29/ 103p

Spot Appraisal at Optimisation

Revenue

$/m $/bn

28m bopy @$80/brrl. 2.24

Costs.

Private Royalties. 4.00mbrrls @ $80 x 22% 70.40

Federal Royalties.24.00mbrrls @ $80 x12.5% 24.00

State Prod Tax 28.00mbrrls @ $80 x 11.6% 259.84

G&A , Debt, Derivatives etc. 40.00

Private Leases Prod. 4.00mbrrls @ $7 28.00

Federal Leases Prod. 24.00mbrrls @ $7 168.00

2024 Capex. 60.00

______________

650.24 2 24

(0.65)

Netback/Earnings. $1.59bn

P/e of 16/1 = MC of $25.44 bn & SP of $21.20/ 1696p and perhaps nearer 180

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Oil stocks enjoy quite high p/e ratios and by analysis 16/1 - 20/1 is common, influenced mainly by how much Capex is spent on exploration and related abortive costs.

By Christmas COPL should have progressed sufficiently to gain a p/e status. For the purposes of the Appraisal I have used a p/e ratio of 8/1.

Four to five years out I believe the ratio should be at least 16/1. So this is what I've applied.

With COPL's Market Cap so low at the moment it's a natural question to ask "why then doesn't the JV Party make a bid to buy COPL outright if the fundamentals in the new discovery are so good"?

Well I imagine it's quite likely that AM would have seen that curved ball coming and defended against it in the Non Disclosure Agreement. He's nobody's fool and he comes to the table with a high level of negotiating experience and skills..

I think AM would have blocked the Party by making it a condition precedent preventing it from making any offers before the data was shown.

I'm not sure I'm right in saying this but whilst shorting a weak stock is not unusual I would say it's quite likely been overdone and coming to an end in COPL's case.

Shorting only normally lasts whilst the benefit outweighs the risk and as I see it that ratio is about to become unfavourable.

In COPL's case however there's been a slight twist. The selling may also be coming from a Bondholder. The good news if that must similarly be coming to an end soon. Here's why:-

All the bonds have a set face value of $200k and a conversion price of 6.75p. So for Bondholders to be converting and selling at the current SP they must therefore be selling at a loss. That gives every indication the seller is distressed or has some genuine reason for needing cash

There is a slight twist and that is that some but not all bonds were issued at a 20% discount. So for those bondholders one could argue their conversion price is less and more like 5.40p.

Nevertheless it doesn't alter the fact that those bonds would also be being sold at a loss. So my conclusion is that any bonds being sold at the moment must be being sold at a loss and therefore the selling is likely to end very soon

If you're short then I think you need to be careful.

As Charles Archer says "a jolt" could happen any day now.

If you're long in this then a little more patience and a good JV is needed. The NAV based on potential resources is going to be huge. Based on a NPV possibly even more. The new discovery could be as much as 2% of US production.

The added value from carbon credits is potentially enormous. Both parties will I think bring value from using to stimulate the FD wells to storage. It'll likely warrant a separate valuation when we have the information.

Please bear in mind a lot of what I've said in this post is just MHO. It will all benefit from revision once the JV details are unsealed.

GLA.

Two pieces of fact based news is firstly the BH's are converting their bonds which indicates they want the shares before the awaited news arrives. And secondly WTI is currently $80.35/brrl as I write. That's pretty much a 10% increase over the last four weeks.

By my spot calculation COPL are now marginally profitable providing two recompletions CC 11-27 & CC 4-27 are now producing albeit unstimulated, which I think is likely. Here's my calculation keeping the math rounded:-

Production from BF 1500 bopd which is 1275 bopd net to COPL. Production from CC lets assume 200 bopd which is 1475 bopd in total to COPL. 1475 bopd is 538375 bopy which at $80.3/brrl gives us $43.2 annual revenue.

Royalties and production tax work out to $13.9m/year giving us $29.3m annual netback. Debt payments are around $16.8m/year at present and G&A etc a further $8.0m/year giving us an annual netback at this stage of $4.5m/annum after these deductions.

Finally production costs at BF are low if we exclude Capex so $1.9m/ annum should suffice. Production costs at CC will be more like $12/brrl given shipping is by road, so $0.9m/ annum for this area giving us a total of $2.8m/ annum.

So by my calculation COPL is producing somewhere around $1.7m per year above breakeven at the moment on a spot calculation excluding Capex.

If you consider the third recompletion at CC with all three stimulated $1.7m positive cashflow per year becomes more like $18.7m per year, which demonstrates how cost effective work on all three wells should be.

As said, not only will the recompletions at CC will be a very quick route to increased profitability, they should also increase reserves and provide important flow rates for the JV.

AIMHO and good luck all.

It's not too difficult to consider a SP of around 4.00p once the sidetrack and second compressor are producing in an optimised and steady state.

He's my very short reasoning. In its current state the field is just about breaking even due mainly to debt payments and the hedging agreement.

That said it should be covering G&A and other business costs sufficient to say the only costs that need to be considered in the unhedged enhancement are its production costs.

So if we assume the additional production is 6MMscf/d that's 2bn scf/y slowing for maintenance.

2bn scf/y is 20m therms/year which on a futures price in Q2 of £1.40/therm would increase annual revenue by £28m.

By simple analysis production costs should be less than 20p therm to give the new side a profit before tax of £24m. I think as with most start-ups it's doubtful ANGUS will be paying much corporation tax if any.

For this exercise however I'm going to use an earnings metric as a basis of valuing. So for this purpose let's assume it's paid in full. In which case we are looking at around £16m net profit or "earnings" per annum for the new well.

O&G companies enjoy quite high p/e ratios and by my analysis that's an average of over 12x. However, I'm going to suggest using 8x to be conservative. I'm also going to suggest using 4bn as the shares in issue fundamental which is also conservative.

So we have £16m x 8 ÷ 4bn to give us 3.20p for the new side track and compressor suite. This is in addition to what I think is a reasonable base price of 1.20 to give us an indicative SP of 4.40p if all goes well.

AIMHO and good luck.

Thank you for sharing your views too Tiburn.

Your reasoning is always credible and sound.

Yesterday on 2nd March at 17:22 Tiburn set out his reasoning and views on the potential JV much better than I could. It's an excellent post and I couldn't agree more. I especially like the following comment near the end:-.

"He did the right thing by shareholders in the past at Oilexco, with SP rising from 16c to +$16."

Further on 25th Feb 2023 at 08:31 Eazy gave us a timeline to where we are now.

That too was an excellent post and I'd like to thank both posters for their tireless contribution in giving sincere shareholders a much better understanding.

Amongst other information, if what we've been told is correct it's very difficult not to believe COPL is now just one step away from entering into a JV with a large oil company that seemingly AM knows. I say that because we're told COPL & the JV Party are at the "Terms" stage in the process now. The "Offer & Acceptance" stage has now passed albeit to perhaps certain terms and conditions.

The "Terms'' stage is the penultimate one before the formal contract is signed. Once the "Terms" have been established the market should be informed that a formal contract has been agreed and what the "Heads of Terms" are and I'm pretty sure we'll see that happening.

The agreement is normally binding on both parties by them entering into a "Memorandum of Understanding" or a meaningful "Letter of Intent" whichever is the most appropriate. The Lawyers then are left to prepare the "Contract" documents thereby allowing the parties to enact what's been agreed.

In my opinion we are very close to hearing that H of T's have been agreed now as I say. Looking at the timeline set out in Eazy's post and the wording in RNS's helps to reason that.

The JV should be well worth the wait and should increase the fundamentals in COPL and I'm in little doubt It'll improve the core fundamentals in COPL by an order of magnitude. Such is the potential in the new discovery.

Amongst other things that's taken time the parties will have been dealing with the caveats submitted on both sides and I've no doubt there will have been several.

I'm in little doubt that one of the JV Party's caveats will have been "subject to oil flow rates"
It follows that in my mind the three recompletions at CC serve a dual purpose. Yes they're a quick and inexpensive route to increasing productivity. But also I feel sure the JV Party would have wanted them to establish the flow rates as I say.

The second one may have been to address the issue with CNOOC. The Company made it known that it wished to exist the US last year and I believe it's been a work in progress since then.

There's never been a better time for CNOOC to exit in my view and I believe it was discussed in Beijing months ago.

https://globalnews.ca/news/8758137/cnooc-prepares-exit-canada-us-uk-oil/amp/

AIMHO and fingers crossed we hear the good news soon. It could be any day now.

Thanks Eazy.

Thanks Easy.

I can't seem to get the links to work but it's probably me.

I know you've been focused on permitting for a while now. Have you any idea on the time and cost of each drill please?

Apologies for the repetitive posts guys. It wasn't my fault, LSE had a problem.

I always number them in the eventual of such issues.

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If you're like me and you're not "inside" then there's a good chance you'll be wondering as I am where we are with both the RBL & JV. Well FWIW here's some of my reasoning.

Although I'm not a qualified lawyer I do have a limited knowledge of English Law and in particular of Contract Law here in the UK. So please take what I say as nothing more than my own opinion but with this in mind.

I've done my best to establish where we are on both counts including asking the Company in recent weeks.

Although information is extremely difficult to obtain, I have convinced myself now that these two processes are still very much work in progress.

As far as the RBL is concerned we were told that two banks were due to submit finance "Terms" to COPL in mid-December. So, I'm assuming that happened and that the "Terms" were offers of finance. Albeit subject to any conditions and caveats.

From AM's point of view, I think he would have preferred to wait for at least another one offer, making three in total before selecting a favourite to run with.

Facility Agreements like these are complicated financial instruments in themselves. However, in this case the selected lender would more than likely insist on anyone with an interest also entering into sub-contracts with the parties whether vested or not.

So, companies such as Southwestern and the cornerstone fund together with anyone with a design liability for instance and possibly the local landowners would need to be included.

There may well have been a considerable number of such considerations to orchestrate and deal with. All of which takes time. So, for me I'm not really surprised that an agreement hasn't been concluded yet. But I do think from what we've been told it's very close now

As I've said before I'm reasonably confident that COPL is on the verge of entering into a JV with a suitable partner (JV Party). We're told that AM is in the process of finalising "Terms" now and if that's right then we're likely to be informed of the outcome very soon.The "Terms" (Terms & Conditions) stage in any contractual process is the penultimate one. It follows an agreement that's been reached in principle.

As in the case of the RBL both parties in the JV will need to tie-in their respective interested sub-parties too, whether vested or not. In this particular case the Terms are likely to be even more extensive given the magnitude and time-frame fundamentals involved. I believe we could be looking at a JV having a total revenue of over $50bn and roughly a 40 year span for the "Life of Field".

In addition, the JV agreement will need to accommodate a payment in whatever form from the JV Party to COPL. Why that might cause a delay is it's likely the JV Party will want to verify the amount of oil in place together with the potential flow rates before agreeing the valuation and payment terms.

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We've been told the parties are aligned on an "at least" amount of OIP. The flow rates may now have been resolved from two recompletions at Cole Creek and the original discovery well to go on.

Last but not least I believe the parties will see the benefits in buying out CNOOC in the deal. CNOOC may well have growing concerns over sanctions and as I understand it they approached Beijing seeking the approval to withdraw from the Wyoming agreement last summer. Added to which the asset is tiny to them and they may be seeing it as more trouble than it's worth. I could be wrong but it makes perfect sense to me. If I'm right then a deal might be in progress or close to being concluded.

Whether AM needs or choses to further improve COPL's cash position by refinancing the Company's debt depends largely on whether there's a sufficient cash injection from the JV partner to cover any or all of the five main cost heads I've listed below. These are some of the ones I feel sure AM will have on his near-term agenda.

The five items specifically relative to COPL and in no particular order are:-

To discharge the current finance agreement. The terms within aren't great. The main anti-commercial aspect is the right given to the lender to do a cash sweep in COPL's accounts. This takes away most of COPL's positive cashflow at a time when COPL needs it most to cover to cover the Capex required to monetise its assets. Estimated cost circa $33m to include the remaining principal and the derivatives.

To discharge the future oil hedging that starts in the summer. Any new lender's likely to ask for it. But maybe a good JV or higher assessment from RS will make it less onerous. Estimated cost circa $10m.

To finance the ongoing gas pressure solution at the BFSU. Estimated cost circa $20m.

To contribute to the Capex needed for the early development of the new FD discovery. Estimated cost to COPL $15m.

To contribute potentially to the CNOOC buyout. Estimated cost circa $8m.

Not all of the above will be needed at once. So a good proportion could arguably be financed through WIP. However, I think a cash injection through either the JV or the RBL of between $60m - $100m would satisfy AM's initial needs.

I'm still not sure about this but until recently I thought the JV would be limited to just the new discovery. I was left under that impression from a recent AM podcast. Having listened to it again however I've now changed my mind. I'm now 70/30 thinking it makes far more sense to include all the assets. Including CNOOC shares as I say.

I'll try to keep my latest views that follow in this revised appraisal as simple as I can and the math rounded. So, I'd like to fast forward to March 2024 now and look at that future spot production at that milestone given it will be the start of the sage grouse nesting season next year. At that time, it's not difficult to imagine COPL producing 15k bopd as its share in a progressive JV.

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The production being a combination of 5k bopd from the BFSU (having replaced most of the low-pressure gas gathering facilities by then) and 25k bopd from roughly 8 - 10 horizontal wells sunk in the new Federal Deep discovery. Assuming a split between the parties of roughly 50/50 of a total production of 30k bopd that is. So 15k bopd net to COPL would be 5.4m bopy.

If the price of WTI at that point is say $100per brrl that would give COPL an annual revenue of $540m. There's lots of Analysts that believe the oil price in thirteen months' time is likely to be at least that.

I'm not a great advocate of using an "earnings metric" valuation method but on this occasion, I think it's more appropriate than an NPV approach which uses DCF as a principle given there are too many variables at the moment an earnings calculation is less complicated.

On the cost side I find it easier to consider them in three categories. Firstly, those that should be applied as % of revenue such as royalties and production tax.Then those that should be considered on an annual basis such as debt payments and G.A. And finally, those such as production that are best considered on a unit cost basis i.e. $'s per brrl.

Here I just would like to point out that royalties on the private leases are around 22% of revenue whilst those on oil extracted on the Federal leases (i.e. Those more than 1 mile deep such as Frontier 1) are around 12%. So quite a difference.

I also want to say we're looking at horizontal wells or stimulated extraction which are categorised as "special conditions" as far as production tax paid to the State is concerned. That rate is currently 11.6% or thereabouts I believe.

So, to get to a notional "earnings'' figure in this example we have an annual revenue of 15k x 365 x $100 to give us $540m.

From there we have to subtract royalties which are $91.2m x 22% for BFSU + $448.8m x 12% for FD to give us $460m. We then have to deduct 11.6% production tax which gives us $407m annual netback after the % costs are paid.

From that we should deduct an allowance for annual Capex which shouldn't be more than $75m for COPL's share. $150m easily covers what's needed if I have the costs of the new wells and associated infrastructure pipework about right. Other annual costs such as G&A should be no more than $15m. So now we're at $407m less $90m giving us $317m annual netback after % costs and annual costs are deducted.

Production costs then should be no more than $15 per brrl which is roughly $81m leaving us $317m less $81m giving us $236m netback before Federal tax.

Alth.ough Federal tax is unlikely to be paid, I think for this exercise it should be deducted. The rate is 22%. So, $$236m would give us $52m in this case