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Hi Rabito
Yes agree - but from that same source the sub-classification of "Prospective resources" which 88e use is:
- Prospective Resources: potentially recoverable volumes associated with a development plan that targets as yet undiscovered volumes.
Which is mutually exclusive from unrecoverable per the diagramme.
Also saw OWs post - but it doesn't state anything above recovery factors - more it points to Stellar being the primary target and that PMO have been conservative. Which is fine, it just means PMO have been more conservative than 88e and they have a different estimate. If I was PMO with a significant business I would be conservative, under promise and over deliver. If I was 88e where I have no revenue, and my share price was largely based on expectation, I'd be more bullish.
IMHO
Thanks Brombard - and no probs :-)
It's why I was excited. Not only for our potential share of those prospects, but what 3D might unearth on that acreage that 2D doesn't given it didn't show up anything as far as I can tell for those prospects when I look at the presentation I gave link to.
I do wonder what happened to Juliet, India and Hotel....
Corrected second link:
Merry Xmas 88ers,
Just posting something I found this morning whilst researching.
Slide 10 in here http://www.ottoenergy.com/site/PDF/2058_0/InvestorPresentation shows the 3D seismic defined prospects on the acreage just to the north of our central fairway which was executed by Great Bear. What's interesting about this is that there are clearly 2 prospects that run under our acreage - Avenger and Skywagon. How much is impossible to tell until we shoot 3D, but interesting as neither of these registered in the 2D seismic, and also interesting that we don’t show in any of our slides the prospects on the Central slopes (originally mapped here http://clients3.weblink.com.au/pdf/88E/01829543.pdf ).
We have a WI of 69.1% of the jagged white areas and the leases directly below where the 3D costs off http://clients3.weblink.com.au/pdf/88E/02027746.pdf
So in summary, looks like a few more prospects could come in.
Merry Xmas 88ers,
Just posting something I found this morning whilst researching.
Slide 10 in here http://www.ottoenergy.com/site/PDF/2058_0/InvestorPresentation shows the 3D seismic defined prospects on the acreage just to the north of our central fairway which was executed by Great Bear. What's interesting about this is that there are clearly 2 prospects that run under our acreage - Avenger and Skywagon. How much is impossible to tell until we shoot 3D, but interesting as neither of these registered in the 2D seismic, and also interesting that we don’t show in any of our slides the prospects on the Central slopes (originally mapped here http://clients3.weblink.com.au/pdf/88E/01829543.pdf).
We have a WI of 69.1% of the jagged white areas and the leases directly below where the 3D costs off http://clients3.weblink.com.au/pdf/88E/02027746.pdf
So in summary, looks like a few more prospects could come in.
(2/2) I read OW’s posts, and went back through them this morning, but couldn’t find reference to the recovery factor. In fact he calls out in a post early this morning that PMO are the “hardest marker on Stellar” which I believe is the crux of the discrepancy here. They have taken a very worst case assumption on the drill, only focused on Stellar and been brutal on the estimates to ensure their investment will make a decent return. Including if you listen to the Q&A assuming they get water from the sea in the North, assuming they need to truck the oil all the way up to pump station 1, etc.
The other reason I believe the numbers 88e use are the recoverable numbers (and therefore comparable with PANR) is the valuation you get to if you use the OIP numbers from Pantheon. I would be delighted if we get even 1/10 of your £42 valuation, if we get to £42 then I’ll be break dancing in the streets, and if £83 then I’ll pay someone else to break dance in the streets for me. But at £42 that’s a valuation of £21bn, and at £83 £41,7bn, which to me are so astronomically high it means that using OIP in the Cenkos method, or in a simple $3 multiplier method can’t be right. Whereas using the recoverable resources seems more likely. Plus - why use a $3 multiplier on barrels of oil you know you can’t recover?
The other interesting thing we could do here is apply PMOs $4 NPV to the recoverable of PANR. This would give us a value of $4.8bn - 5.2bn, or $9.54 - $10.34 (£7.29 - £7.91).
I also added in Mergez and Theta to numbers I posted yesterday, and ignoring unconventional and Texas, I get a risked SP of between £0.59 - 0.65, and an unrisked of £5.49 - 5.90 (using the Cenkos method).
Good debate Rabito - I think I’ll ping Dave Wall a note and ask for clarification on whether his numbers assume a recoverability factor.
Good luck!!
(1/2) Thanks Rabito,
I had a listen and you’re absolutely right, although I put this down to a difference of estimation versus a different classification of the variable. So if 60% WI for PMO = 150mbbl, they are saying the whole recoverable resource is 250mbbl. If, as you believe, the resource stated by 88e is pre-recoverability, factors then their gross mean prospective resource of 639mbbl is more conservative that PMO’s 1bn barrels by about 35%. It would mean that PMO (who have been ultra conservative as they state in their presentation) have taken the high case from 88e (999mbbls) to get their estimate. This doesn’t add up for me. My take is that PMO have taken the data and derived their own estimates, which differ from 88e, and have taken a much more conservative approach. If however we assume PMO is right, then we are looking at Stellar recoverable resources of 75mbbs for 88e from Stellar alone - if I then take the high estimate from the other prospects and assume a similar 25% recovery rate and then apply 88e’s 30% I get another 117mbbls. So back up to 192mbbls….
BTW - when they talk about “market share” I believe they are referring to profitability, so the margin made by the contractor after taking off all the costs. Some use the term “net backs” I believe for this. So @$4 per barrel NPV, I think PMO said they had assumed 40%, but Oil Search have managed to optimise this up to 61%. There’s a good overview of how this stacks up on slide 46 in this deck https://www.oilsearch.com/__data/assets/pdf_file/0011/39728/Oil-Search-Alaska-Field-Trip-Presentation.pdf
The other data point I have is from the presentation at the Globe in November, when Dave Wall put a value of $3 per barrel on the 488mbbl which are net to 88e - which he also admitted we wouldn’t get all of given the COS of the different prospects - but was laying out the envelope of opportunity I guess.
So the data points I have are:
DW’s $3 x 488mbbl of prospective resources
Cenkos using the prospective resources and applying a COS and $3 per barrel (NAV)
PMO’s WI 150mbbl but applying a $4 per barrel (NPV)
Interestingly, if you look at the attached article, which I know is PR, there is an interesting valuation not dissimilar to that Otto put on 10% of the GB acreage. Basically states that PMO have paid $23m for 12.5% of 88e.https://www.nextoilrush.com/88e-partner-1b-premier-oil-north-slope-farmout-drilling-q1-2020/ But this is clearly paid media - so pinch of salt territory.
BTW - the Cenkos note as PDF is here if anybody wants to look at the methodology for valuation https://ufile.io/kc6srgsr
Thanks GG - Happy New Year to you too.
Rabito - having had a look at the standards I'm feeling more confident that 88e estimates does have recoverability factored in. 88e provide a range for Stellar (Torok) of: Low = 32m, Mid = 604m, High = 999m with gross mean prospective resources of 639m of which 30% is 88e's. (http://clients3.weblink.com.au/pdf/88E/02174284.pdf) Each value is achieved by applying different recovery rates I believe.
If you're right however, then one could argue that PANR is looking incredibly cheap on a comparative basis to 88e. If I’m right then less so, although within 88e’s share price on top of the conventional you have the unconventional prospects, and in PANR you have Texas, and as per previous note - if 88e can get the unconventional to work there’s a good chance PANR can and there’s zero in the PANR share price for this.
There's also another interesting data point that is relevant to PANR.
There is an interesting Cenkos note from November (which also takes the prospective resource numbers and does not apply further recoverability), and if we focus purely on Stellar, they place a risked value per share of 0.9p and unrisked value per share of 5.8p. Worth noting they use a COS of 15% for previously discovered resources, and 10% for undiscovered prospects. Looking at the calcs:
Risked share price for Stellar (Torok)= 0.15% (COS) x $3 per barrel (in ground value assumption) x 191.7m = $86.7m
$86.7m/6.9bn shares = 0.9p per share
Unrisked share price for Stellar (Torok)= $3 per barrel x 191.7m = $574.5m
$574m/6.9bn shares = 5.7p per share
Interestingly PMO used $4 per barrel in their presentation as an NPV per barrel in the ground, and were open about being very conservative given the infrastructure requirements. Sticking with Cenkos for a mo and reading it across to PANR, then for Alkaid given the success we could take the unrisked method given flow has been proven and for Talitha the risked method.
Alkaid/Phecda = (90m to 135m) x $3= £270m to £405m = $270m to $405m
$270m/503m = $0.54 = 0.41p
$405m/503m = $0.81 = 0.62p
Talitha Appraisal = (90m to 135m) x $3 x 0.15 (COS) x 0.9 (WI) = $36m to $54m
$36m/503m = $0.07 = 0.05p
$54m/503m = $0.11 = 0.08p
Talitha Exploration = 335m x $3 x 0.1 (COS) x 0.9 (WI) = $90m (used a lower COS as no discovery yet)
$90m/503m = $0.18 = 0.14p
Adding that lot up I get £0.60 - £0.84 as a value per share for Talitha and Alkaid/Phecda, or £302m - £423m worth of total value.
I haven’t deducted royalties from the above, and have not included Theta or Mergez, plus we still have the new leases to add whatever we’ve found with eSeis as well. But focused on this as I believe this is the focus of the farmout.
The question is what would you want from that lot in order to give over $100m to PANR to farm in? For $23m, ignoring all but Torok, PMO wanted 60% or 383m barrels, using above valuation then 383 x 0.15 x $3 = $172m. So they were looking for $7.47 back for
Thanks Dazzle,
I went through SPE-PRMS standards which are referred to as the classification standards for the how we have defined "Prospective Resources" per the classification we have used. The definition for "prospective resources" is "those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects". https://www.spe.org/en/industry/reserves/
So I believe the recoverability has been taken into account in the estimates we have. Not to say that won't change, but I was worried for a mo that we were actually looking at 20%=60% (say) of 192mbbls. But my understanding is that this is already taken into account on the estimates.
(2/2)
Looking at the recoverable conventional overall, PANR vs 88e with 1.2-1.3bn vs 1bn barrels post FO. On Charlie success 88e will be pushing to shoot 3D on their Eastern fairway which the Dalton and TAPs run through. The 3D on the western fairway added 71% to the reserves, so will be interesting to see what happens - although the starting prospectively is only 124m barrels from reprocessed 2D. This doesn’t include whatever sits behind the new leases PANR just won - so be really interesting to see what they think is in them.
One thing that is worth thinking about, is that Great Bear’s original hypothesis was to unlock unconventional, and focused on the HUE/HRZ source rocks I believe, and they then changed tack to focus on conventional I guess as the seismic and exploration well data came in. But worth bearing in mind that the HRZ also underpins PANR acreage so worth noting what 88e discover in the HRZ with Charlie as may also be a positive read across. http://www.petroleumnews.com/pntruncate/827149061.shtml
And to your point about attention paid to PANR by 88e board - I completely agree. In particular not many realise 88e actually have a WI in some of PANRs acreage: “Accumulate has also entered into an agreement with Great Bear Petroleum to acquire a 69.1% working interest in 24,269 acres adjacent to, and north of, the Central Play Fairway at Project Icewine (16,786 acres net to Accumulate). Consideration for the leases was a cash payment of US$206,388 (net to 88E), of which US$167,663 will be directed to lease rentals due by 1st October 2018.” Which brings 88e very close to the Talitha prospect - so results of that will be really interesting for 88e.
(1/2) Thanks Rabito,
Great note that has got me thinking and going back over various presentations.
I agree with your point on direction of travel, and having re-listened to the interview there are many analogues to the narrative from 88e and the reason they went with PMO. A big part of it was "fit", strategic and cultural, and I get the same sense from Jay in terms of what he's looking for. 88e were trying to do a rapid FO, but throughout the process Dave Wall was pretty open about the fact that they were having to march to PMO’s drumbeat. Hence my 12-18 months time frame - it was the approvals on the PMO end that slowed it down in the end.
You're right re: 88e share price reaction to FO deal. My take is that PIs were expectant of a multi-well programme and back costs and a super major - Conocco was mentioned a lot, hence when a 1 well programme and no back costs and a mid-tier came through I think the market reacted at best with a muted response. Dave Wall recently described that he was surprised by the market response, and had expected the share price to increase. Given the alternative route forwards - an equity raise at 0.7p of $25m which would have equated to a 30% dilution of shareholders, vs. what is effectively a 48% pt WI reduction of the western acreage only, and only for conventional prospects - it was definitely a good move. I think the follow-up CR also put the brakes on any SP appreciation.
Anyhow, my take away from this is that a 4 well programme and back costs is a rich ask for PANR, and I suspect @$20m per well (assuming no ice road costs) and adding some back costs - say $10-20m - we’re looking at a $90-100m deal. Great if we can get it, but that's a sizeable outlay. If we use 88/PMO FO as an analogue - then $25m US for 60% of 2.4bn barrels mean unrisked = 25/1440 = $0.017 per barrel. Clearly PANRs level of risk is lower given oil has flowed at Alkaid, but how much would we need to give away for $90m? Certainly not at $0.017 per barrel, but $0.1 per barrel? $1 per barrel? Also - I guess a $90-100m deal puts at the larger end of the mid-caps who could afford that kind of capital?
In terms of size of reserves - I may have gotten this wrong, so please correct me, but I think PANR and 88e are closer than you think. 88e’s reserves are “Prospective Resources classified in accordance with SPE-PRMS” where prospective resources are classified as “those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects”. https://www.spe.org/en/industry/reserves/ So if you compare the recoverable Alkaid with the recoverable from Charlie-1 net to 88e (focusing as you say on the Stellar ZOI and ignoring the 4 other prospects) then you you have 88e:192mbbls and PANR:90-135mbbls.
Thanks boom.boom
I wasn't sure if the 192 or the bigger 480 was declaration of the oil in place, then we'd need to multiply by a recoverability factor as well.
I also checked the SPE-PRMS framework as well, and "prospective resource" does factor in recoverability so all good.
Thanks for taking the time to respond, appreciated.
We declare
So taking the 192m barrels
Quick question - does anybody have a view on recoverability?
There's 480m barrels net to 88e - but what should we factor in for recoverability?
I know we need to wait flow tests, but would be grateful for opinions.
Thanks
Rob
I disagree, 5 months for a farmout is not long at all. In fact it is way below the average farmout duration. 88e took about a year, and there are plenty of other taking longer than that.
The interested teams need to get hold of the data and perform their own due diligence before creating the terms of the deal which then needs to go back and forth between lawyers, and possibly needs board level approval depending on the deal. The later could take 3 months on it's own!!
I'm expecting FO to take 12-18 months to conclude, and I'm expecting mid-tier not a super major. Experience from 88e was that the majors wanted too much %, and the priority they would give to the project was out of whack with the pace 88e wanted. Jay infers similar in the interview.
I bought here for Alaska, not Texas, so my investment hypothesis is based solely on that. Any Texas production is pure upside to me.
Interesting to compare PANR and 88e, one has a FO partner but has not flowed oil. The other has flowed oil and has no FO partner. Both have significant prospects and both have about the same MCAP at the moment.
If 88e get the oil flowing, the SP reaction will be an interesting analogue given the similarities in prospect size, with PANR being much closer to Dalton Highway and TAPS.
Not sure if you've seen, but here's the land we've leased.
http://dog.dnr.alaska.gov/Documents/Leasing/SaleResults/NorthSlope/2019W/NSA2019W_Apparent_High_Bidder.pdf
Very targeted - Northern leases butt up agains OilSearch Leases. Interesting move...
For comparison total leases on North Slope
http://dog.dnr.alaska.gov/Document/A9C606F8EDC04E47A1FC9B5B0012252E/12-3-2019__North_Slope_Notification_Lessee_Map
https://seekingalpha.com/article/4312952-petrotal-overlooked-spin-off
Re: updates - he said most likely fortnightly or upon significant news.
The other thing folk should brace themselves for is the timelines.
So we'll have results from any flow tests April latest I think, and lab results for HRZ samples July time
For balance - Dave did also state on failure it would be 70% off the share price whatever it may be at the time. He also stated that he was confident not all of the 7 targets would come in.
I found his narrative to be very fair, balanced, and clearly laid out the risks for us all.
He also laid out the upside of proving up the reserves and selling 88e portion for AUD 1.5bn.
And that's the nature of the game.