Value OEX. 15th Nov approaches13 Nov 2018 08:27
Scenario One is the receipt of US$3 million that is claimed by Oilex against GSPC and the current 45% interest. Over the coming months we anticipate that the problems within the ownership of the Cambay Field PSC will be resolved and a new joint venture partner emerge which will likely provide the funding for the planned drilled program, a move which is likely to involve a farm-in deal. We have estimated that as a result, Oilex’s interest in the PSC could be reduced from 45% to 30%.
Scenario Two is gaining a 100% interest in the project in the event of GSPC not meeting the Stay requirements as set out by the court. Should this occur we believe the stage would then be set for the ushering of a new joint venture partner which will likely provide the funding for the planned drilled program through a farm-in deal. We have estimated that as a result, Oilex’s interest in the PSC may be reduced from 100% to say 70%.
Scenario One – Valuation
10% discount rate
12% discount rate
US$m
£m
US$m
£m
Cambay Field PSC (30%)
51.74
39.80
46.08
35.45
NPV(10) corporate overheads
(20.68)
(15.92)
(18.76)
(14.43)
Receipt of US$3 million
3.00
2.31
3.00
2.31
Valuation
34.06
26.20
30.32
23.33
Scenario One – Per share valuations
10% discount rate
12% discount rate
Valuation
£ million
Per share
Valuation
£ million
Per share
Currently in issue (2,265.4m)
26.20
1.16
23.33
0.99
Fully diluted basis (2,520.1m)
26.20
1.04
23.33
0.93
Scenario Two – Valuation
10% discount rate
12% discount rate
US$m
£m
US$m
£m
Cambay Field PSC (70%)
120.70
92.80
107.51
82.70
NPV(10) corporate overheads
(20.68)
(15.92)
(18.76)
(14.43)
Valuation
100.02
76.93
88.75
68.27
Scenario Two – Per share valuations
10% discount rate
12% discount rate
Valuation
£ million
Per share
Valuation
£ million
Per share
Currently in issue (2,265.4m)
76.93
3.40
68.27
3.01
Fully diluted basis (2,520.1m)
76.93
3.05
68.27
2.71
These potential target prices may look high compared to the current market price, but that is largely, in our view, due to the shares being tremendously oversold and that fears over a drawn out litigation/arbitration process have held the stock back. As per the RNS yesterday, it seems to us that Oilex are now in a strong position and that there will very likely to be political pressure within India to come to a resolution, finally.
We believe by any conventional yardstick that the shares are very inexpensive. We also point out that the true potential at the Cambay Field PSC is a lot higher – the 145 Bcf planned to be produced until 2029 represents just a fraction of the resources here. We in fact see our model and our valuation as actually representing a base case that does not account for further extension or an even larger expansion. An additional government approval would be required t
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