Titanosaurus30 Sep 2024 07:54
Titanosaurus is too large for Predator to develop, so the stated intention is to prove up and sell, or perhaps farm out a majority to a large O & G company who would also be operator. How would such a buyer value the project, and what would PRD be likely to receive?
All professional outfits use a net present value – the value of future cash flow today. For those who are not familiar with this, a number of inputs are needed – capex, pricing, sales over time, opex, taxation; and a discount value reflecting the time value of money. Think of the NPV discount as the opposite of compound interest – for example, $100 compounded at 10% over 10 years gives $260, but $100 discounted at 10% over 10 years gives $35.
Paul Griffiths has previously suggested an NPV10 value of $2M per BCF of methane. That values a P50 6TCF GIIP @70% recoverable = 4.2TCF at $8.2Bn without the helium, net to PRD. (CHAR was using $4M per BCF!). Let's do a more detailed assessment, feeding these conservative assumptions into an NPV spreadsheet.
*P50 methane 6 TCF GIIP net to PRD.
*P50 helium -1.4% concentration.
*70% recovery = 4.2 TCF recoverable, so a 23-year life at max rate 500mmcfgd, = 180 BCF per year, we will use a 20-year life. There is potential to double output per year for a 10-year life.
*$8 per mcf methane (half the current import price from Spain).
*$225 per mcf helium (current long-term ex-producer contract price $225-250).
*Methane sales - Year 2 -100 mmcfgd. Year 3 – 250. Years 4–20 – 500.
*Helium sales – Year 2 – 107 mmcfgd. Year 3 – 267. Years 4-20 – 530..
*Opex (guess!) $1 per mcf methane, $10 per mcf helium.
*Capex (guess!) - 30 wells @ $3M = $90M; 5km pipeline and ancillary equipment - $10M; helium separation & compression - $50M, equal expenditure over 2 years.
*Tax – 5% royalty throughout, plus 31% corporation tax after Year 10.
*Discount rate - 10% - interest rate environment is improving, but Morocco has risk.
This gives an NPV10, or what it is worth today to a buyer, of $11.4Bn with helium, $7.65Bn without. Since they have to finance the project, take on execution risk, provide the staff to operate, and of course make a healthy profit, negotiations might fall in the range of 25-50% of NPV, depending upon a royalty or stub equity. How about if PRD receives 37.5%? - $4.28Bn. At a GBP:USD rate of 1.338 and a fully-diluted 600M shares in issue, that would be equivalent to £5.33p per share in a P50 success case.
To get to purchase-readiness, PRD would need to drill & test 4 wells – cost around $15M. An O & G major would do their own flow assurance & FDP as part of their due diligence. $15M outlay for a potential $4.3Bn return seems like a decent risk/reward to me. My opinions, my calculations, others here will disagree – they have already told us that I haven't a clue what I am talking about, and that there is no gas.
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