RE: OK,..Does anybody...26 Aug 2018 10:10
Oil. 100tcf would be £150 per share. Just sayin’ :-)
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Doesn't work quite like that St Mary. Sadly!!!!
Even if there was 100tcf in place,... you would then apply a recovery factor (Rf)... of say 50%...so only 50 tcf would be "in play".
You then have to look at the chance of success,.. ie the probability of finding it and being able to flow it economically, as it won't have all been proven by drilling and EWT's, So you would then apply another discount,.. the Chance of Success CoS factor.....of anything between 90-10%... ... and then, finally,... we will get to a recoverable volume to which you can apply the £1.50/tcf.
So, as an example,... and based upon complete guesstimates (!).. if you look at the high case Basin volume= 34tc
1 Say we prove up 5tcf by the drill bit? That would be 2.5tcf recoverable (at 50% Rf) x 90% Cos= 2.25 tcf
2 If we assume that the "analogous" features make up a further 10tcf; then, 10tcf x 50% Rf = 5tcf Then apply a lower 50% Cos 9 ( as only probable not proven resource) then that= 2.5 tcf
3 That leaves 19tcf (34-5-10=19) as inferred resources; 19tcf x 50% Rf= 8.5tcf x 10%CoS=0.85 tcf
So the final valuation would be something like (2.25 + 2.50 + 0.85)tcf = 5.1tcf x £1.50= circa £7.00/share
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The above is just an example,... any major will apply a recovery rate and Chance of Success % to suit their risk appetite...... and that will be to some extent ( a large extent in this case,..I would suggest) be driven by the quality and volume of data that we have collected with the seismic, 2d and 3d and the radiometry etc.,. the quality of the info in the Data Room is clearly key to the valuation and our negotiating position.
I actually think the Data Room has been open for some time,... probably not long after Rothschilds were appointed. James has hinted at this in the past.
It is important that the Data Room is operated by a 3rd party, as it were,...all of the "suitors" need to know that the company is playing with a straight bat,..that everyone has direct access to the full extent of the technical info available and at the same time as the other bidders,... ie no-one gets preferential treatment in any way, shape or form etc.,
Very exciting few months ahead of us; whilst it is difficult not to feel impatient I am happy that the end game has begun and it will be fascinating to see how this plays out. One thing is for sure, we have a real "deal-maker" leading our team on to the pitch.
Best
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