RE: Hold your horses !!!!13 Jul 2020 13:21
JR934 - in the event there was an agreed bid instead of interested parties farming in to JOG's licences, what sort of price per barrel do you envisage might apply to the 2C resources up for grabs?
I've been doing a bit of lateral thinking, which ignores what, to me, is an entirely false SP. People don't seem to give any logical thought to the overall situation in relation to oil and future demand, or to JOG's unique situation, given it owns 142mstb of discovered 2C oil (33° API) in one of the NS's best postcodes, together with a further 230mstb of prospects in the same general area.
It should also not be forgotten that JOG also has a practically zero carbon method for extracting the oil. And the ongoing progress with the hub development shouldn't be forgotten either, including the Integrated Studies Agreement which, if successfully concluded, could lead to shared costs of developing the hub.
With an assumed long term oil price of $62.5pb built into the model, the NPV of JOG's assets was most recently independently assessed at $1.15m. As those who have read some of my previous posts on the subject of DCF and NPV will already know, the best measure of any company's worth is derived from this method, although it does rely fundamentally on the assumptions used in constructing the model. The price of oil, particularly in the earlier years of the project is probably the most important assumption in JOG's case. It is only my take on the situation, but it seems probable to me that most oil pros taking a view over the life of JOG's GBA fields (20-30 years?) would regard an oil price of $62.5pb as being realistic, if not conservative.
Anyway, I'd be interested to learn your views, JR - and anyone else who cares to comment. My own thoughts are that given JOG's assets rate a DCF/NPV of $1.15bn, it wouldn't be greedy to expect someone to pay somewhere between one third and a half of this to take on the whole project now. Risk is endemic, but the industry knows all about this and the risks here would be a lot less than in many other scenarios, for cash rich oilcos looking to bolster their reserves whilst at the same time providing significant upside potential.
Taking the "we're prepared to pay you a third of NPV now" scenario, I get to a number of $383m, or roughly £300m - c.1300p ps fully diluted. Half NPV would yield 1950p ps. A median 1625p ps would imply a price for the discovered 2C resources of between $3 and $4pb, with the prospects thrown in for nothing.
My personal view is that farming out on terms that would allow financing of the project to be determined, then selling post agreed FDP, might be the preferred way to go about a sale. Although JOGs share of what would by then be categorised as 'reserves' would be much reduced, the ppb expectations on a sale would be much increased.
Risk can never be avoided. All the above are just thoughts and opinions.
dyor
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