RE: Thoughts14 Oct 2021 13:59
Spike, The first time I heard 'no brainer' in relation to a stock it cost me quite a bit of money. As a result whenever i see that being used, as it does quite often on boards, my reaction is always the opposite of what the terminology is trying to achieve.
You are right there are risks here but unless I am reading the CPR wrong then then those risks have been quantified as being particularly low. The ability to finance the field development upon successful appraisal for example is put at 95% CoS. The same with finding oil and risks such as securing agreements with major equipment suppliers.
That a named, totally independent professional with a high level of skill and knowledge in the field has put the the CoS of going into production at 86% (based upon $50 oil) is quite something. That 86% as you are no doubt aware is made up of even lower risked events multiplied together.
'Development is economic with current 1C, 2C and 3C resources. Development is expected to proceed after appraisal provided the appraisal outcome is not worse than 1C (~95%), acceptable commercial arrangements can be secured with facility (FPSO, MOPU, FSO) owners (95%) and the joint venture partners can secure development funding (95%). RISC estimate the probability of development to be 86% (95%x95%x95%).'
We can extrapolate from that that they are pretty sure that this is a low risk enterprise. In reality how likely is it that the JV partners will not to agree arrangements with FPSO etc owners for example. A small 5% risk does its job in not tying the CPR author or his firm (RISC) down to their own risk.
Ontarget - Good timed post. I am finding it hard to raise negative issues because I'm genuinely stuck in finding ones that have relevant weight. The JV seems to be working well, the site has been drilled before without issue, the economics are sound, the PSC fiscsal conditions agreed with Timor-Leste are analgous with those of Australia, the water depth is very shallow, the rig is hot and secured and paid for and has been used by Carnarvon successfully before etc, etc, etc. The Board however are new to me, I don't know them and a risk could be that my investment is based upon believing the words spoken or intimated. If I see B-10 spud, result from B-10, then another asset being secured after that in that order and any future dilution placed at a 'reasonable' discount then that risk will clearly recede.
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