Member Info for Scot126

08:31

Sharenovice22 - how you managed to fit so many errors into one post is a credit to you. Bravo! Let's pick it apart, shall we?

88E has two flow tests, not one, planned for Hickory-1 in the coming weeks. The SFS and SMD horizons are due to be tested.

Due to PANR's portion of these two reservoirs being updip of 88E's portion *any* success reported by 88E will have a leveraged positive effect on PANR's numbers. This is due to the *fact* PANR's recoverable resources are larger in quantity (see seismic and volume guidance issued by both companies) and quality (you need to research Dmax).

An easy example for you to comprehend, Sharenovice22. Look no further than the 88E flow test of the SFS. PANR's guidance does not include a single barrel for the SFS. If the flow test of the SFS at Hickory-1 is a success, this will have an immediate positive effect on PANR's fundamentals. Fact.

Looks like you've accepted 88E are going to be running out of cash once they pay for this winter's operations at Hickory-1. AU$18.3m will cover the costs of the ice road, ice pad, equipment, fracking services, contractors, etc. Unless Burgundy come through with the second delayed instalment, 88E will be running on fumes once it pays its bills this winter.

Yes, PANR has c.$30m CB outstanding. In my analysis you'll note I have accounted for that by adding >100m shares to the SOI. PANR also had $12m in the bank after the end of Jan settlement of the share subscription by our largest shareholder, Lord Spencer (billionaire) and our Exec Chairman. Speaking of which, David Hobbs now owns 3.7m PANR shares paid for with his own cash. Remind us, how many 88E shares has Ashley Gilbert purchased? The answer is zero. And in fact he opted to take his bonus in cash rather than shares last year. Wise decision for his wallet but he's hardly aligned himself with 88E shareholders, has he?

Do better, Sharenovice22.

08:16

Ayecuramba - this was all decided millions of years ago. The recent lines on a map at the surface mean that the fundamentals will out, i.e..that PANR's portion of the shared assets are far larger than 88E's in absolute volume *and* the updip effects of Dmax mean there's a Hugh qualitative differential too. Look at 88E management's own guidance for goodness sake. Point to me a single data point which reverses my so-called bias. You won't be able to because there is no such data.

If I thought 88E was massively undervalued v's PANR I would say so. It's not.

07:41

Hi Galicia - I'll answer your points in turn.

1) Take your point about US OTC stocks. Actually, yes, on a risked/unrisked basis I could easily justify PANR's $2 value at the time...even more so today following the re-entry and flow test of Alkaid-2. That the market hasn't discounted the massive upgrade in PANR's investment case due to new data on the SMD at Alkaid-2 and the implications of the conventional plays within the newly acquired leases is a timing issue for a fundamental investor like wot I am. I note you haven't bothered to offer your own calculations of fair value or risked/unrisked NPVs for either stock. You may be comfortable playing financial 'pass the parcel' but I am not.

2) No catalysts for PANR? Lol, you're kidding, right? Look no further than 88E's two impending flow tests of the SMD and SFS. PANR has *nothing* in its numbers for the SFS so a success for 88E will have an immediate catalyst for PANR.

PANR's Exec Chairman has re-posted guidance to expect one tranche of non-equity finance to be announced by end of Q1'24, with the remaining by end of Q2'24. *If* and I repeat *If* such finance is secured do you honestly think they won't be drilling in the late summer/autumn????? Likely at Ahpun East?

3) I recognise the cycle of OTC life of which you speak. Unlike 2021 and 2022, however, there's no wave of credulous OTC punters WFH during a pandemic listening to Jersey Girl and Fat Bloke and the guy who was convicted of fraud for his social media activity which included 88E. Have a look at the 88E Twitter account. Full of OTC investors who have lost their life savings in some cases, calling for 88E management to be prosecuted. To answer your opinion directly, I think there is zero chance 88E gets anywhere near previous highs. I also think that once the market works out that 88E will have hardly any cash after paying for the flow tests in Feb and March together with the share consolidation and that 88E is already overvalued on the fundamentals will mean that 88E will be lower at the end of ops at Hickory-1 than it is now. Happy for you to look me up then.

4) Fundamentally disagree with you about transparency in PANR's guidance to the market. But then the clue is in that word "fundamental" for someone like me, if not for you.

Page 2; continued from below.

It is quite literary barmy. The market will work this out at some point, it always does. The only question is who will be left holding the baby, all those 24bn 88E shares, when the market does the maths?

- “Oh, but 88E deserves a mkt cap of £60.6m today.”

- “Ok, fine. If you apply 88E’s value per barrel in the ground to PANR, its shares ought to be trading at 42p (currently trading at c.26p).” – scot126

If that calculation doesn’t float your boat, try this for size. Let’s say the market is correct about PANR and that each barrel in the ground is indeed worth only 10.77p. In that case, 88E ought to be trading today at 0.161p (currently trading at 0.24p).

Furthermore, even if both flow tests are successful but the market decides 88E’s premium is now unjustified v’s PANR because 88E has run out of cash after this winter season then 88E’s fair value increases to 0.197p only.

I repeat, even if both flow tests are successful, the fair value of 88E will be 0.197p if the market values a barrel in the ground the same as it does PANR.

There is no mathematical or fundamental basis for 88E to rise from its current SP. Not even if both flow tests are successful. To be crystal clear, if you think the 88E SP rises from its current level of 0.24p at *any* time in the future, you are relying on (a) uninformed punters having a gamble on something they know nothing about or (b) 88E raising tens of millions of dollars over many years to prove up Namibia or Leonis. /end

By popular demand, here’s the summary using very clear language.

1) Based on the fundamentals, 88E is currently substantially overvalued v’s PANR.

2) Each PANR recoverable barrel in the ground is currently valued by the stockmarket at 10.77p. PANR’s barrels in the ground are *far more numerous* and of a *higher quality* than 88E’s barrels in the ground. This is due to the updip location of PANR’s portion of the shared reservoirs, and the implications of Dmax on the characteristics of the reservoirs. The higher classification (absolute volume *and* proportion of contingent resources) is also due to the fact PANR has drilled 6 wells on their acreage and completed at least 8 flow tests. 88E has not yet completed any flow tests within Project Phoenix.

3) Some forum members have attempted to wilfully ignore the *fact* that my analysis of 88E’s value was based on the *unqualified presumption* that both of the impending flow tests at Hickory-1 will be *completely successful*. As a result of this unethical misdirection where posters have sought to argue, without merit, that the market is bound to react positively in the lead up to, and following, the results of the two flow tests I now feal obliged to update the 88E valuation. This time I am going to apply 88E management’s *own formal guidance* on the Chance of Success for both the SMD and SFS reservoirs at Hickory-1. So instead of me working on the basis that both flow tests are 100% successful, we’re going to listen to what 88E management assess is the risk of success/failure.

Revised calculations:

a) SMD: was 168.5mmbo, now 136.5mmbo (CoS 81%)

b) SFS: was 100.8mmbo, now 50.4mmbo (CoS 50%)

C) BFF: no change, 2C Best Estimate of 102mmbo

Total: P50/Best Estimate of 288.9mmbo recoverable resource, of which 102mmbo (or 35.3% of total) is defined as 2C contingent resource.

Deducting, once again, the value of Longhorn and Namibia from 88E’s mkt cap gives us £51.9m, the imputed value of 88E’s portion of the shared asset. Using 88E management’s *own risk assessment* of the likelihood of success for the flow tests means that the market is today valuing each risked recoverable barrel at 18p.

Instead of forum members metaphorically sticking fingers in their ears, closing their eyes and shouting out, “Wah, wah, wah, wah!” how about this forum gets serious and explain why it is justified the market values an 88E barrel in the ground today at an outlandish premium of 67% to a more highly classified PANR barrel in the ground?

Page 1: see above for Page 2

Lol, read it marmaris, it'll send you off into a deep sleep. Plus, you might learn something?!

Page 6.

Downside from poor results at Hickory-1? Lots for 88E and none for PANR. How come? PANR doesn’t have any numbers in for the SFS horizon within their formal guidance so it’s all neutral to upside risk for that reservoir. The SMD? PANR’s base case for the SMD is already known from the data collected by the Talitha #A well located a couple of kilometres north (updip) of Hickory-1. When the PANR Exec Chairman described the implications of the Hickory-1 flow tests as a “free hit” for PANR this was an assessment grounded in science. Obviously if there are any disappointments from either flow test at Hickory-1, analysts (and I) will have to downgrade their numbers for 88E’s recoverable resources. That’s the downside risk for 88E.

I look forward to responding to fact-based questions concerning this comparative analysis. /end (6/6)

Page 5.

Question. Why is the market valuing a lower classification 88E barrel in the ground at a premium to a higher classification PANR barrel in the ground? Bluntly, this does not make any logical sense IMO. On the morning of 88E’s announcement relaying the results of the second (of two) flow tests at Hickory-1, will the market decide there is simply no justification for the premium value of 88E barrels in the ground? If the market comes to that decision, the 88E SP will fall from its current level, not rise. Yes, ***even if both flow tests are successful***.

Applying logic and the fundamentals to this investment process, in the short term the only reason to hold 88E over PANR is the hope that an ill-informed cohort of social media punters arrive to bid up the 88E SP in a speculative manner. I liken it to a game of ‘pass the parcel’…”Enjoy the party but dance close to the fire exit!” I submit that unlike 2021 and 2022 there is no sign whatsoever of that type of, mostly US-based, amateur trader. Does anyone disagree?

Longer term, 88E’s Leonis and Namibian assets *may* very well turn out to be brilliant, world class projects but we won’t know that until an immense amount of capital is raised to drill and collect the required data over a number of years.

I have read a few posts on this forum where the shareholder states that they’re interested in 88E rather than PANR “for the leverage”. I confess I do not understand this attitude in the slightest - for two reasons. Firstly, it is PANR that has the greater upside leverage in volume uplift across the combined acreage from the P50 (best) estimates to the P10 (upside) estimates. Secondly, and as repeated as nauseam on this forum, due to PANR’s portion of the shared reservoirs being *updip* from 88E’s portion, it is PANR which will enjoy a leveraged effect to *any* successful data from the flow tests at Hickory-1. Put simply, say the reservoir characteristics confirmed by the flow test of the SMD-B at Hickory-1 are better than 88E management expected. This data will have an *enhanced positive effect* for PANR because its share of the SMD is larger *and* it is updip of 88E’s portion, thus Dmax will deliver *leveraged* upside to PANR’s assessment of the SMD recoverable resource on their acreage.

Page 5; see above for Page 6.

Page 4.

When 88E management announced the acquisition of Longhorn in early 2022, regular readers will perhaps recall I posted that I could see the logic of the deal. If the dividends from Longhorn could cover 88E’s G&A (salaries, listing costs, office rent, travel, etc) then that would always keep the lights on - vital for listed E&P companies! As can be seen, Longhorn is requiring more capex investment from 88E than originally envisioned, all simply to stand still. And what has 88E gained in production volumes for that “extra” capex investment? In February ’22 gross production was running at c.300boepd and the gross run rate at the end of 2023 was c.370boepd. The guidance on acquisition was for Longhorn’s gross production to “double by the end of 2022”. By any measure, production at Longhorn has been a disappointment.

How to value Longhorn? Is it worth the total investment to date of US$15.66m? I wouldn’t have thought so, would you? The most recent bolt-on deal valued each reserve barrel in the ground at US$0.33. A readacross valuation would see 88E’s Longhorn net 2P reserves of 3.66mmboe valued at US$1.2m. That’s too low. Examining the underperformance of the assets since acquisition, it would be unreasonable to use the original price of US$4.70 per net 2P reserve barrel. Perhaps $2 per 2P reserve barrel? Call it US$8m (£6.3m)?

Deduct the Longhorn and Namibia valuations from 88E’s current mkt cap (£60.6m - £6.3m - £2.4m) and we arrive at £51.9m. Thus, the market is valuing 88E’s portion of the joint assets (co-owned with PANR) at £51.9m. Therefore, each of 88E’s Project Phoenix recoverable barrels in the ground is currently valued by the stockmarket at 14.0p. The equivalent value for each PANR recoverable barrel in the ground is 10.77p.

NB. THIS COMPARATIVE VALUATION IS CALCULATED AS IF IT WAS 8AM AFTER AN RNS DESCRIBING BOTH FLOW TESTS AT HICKORY-1 AS COMPLETE SUCCESSES.

Debate:

*If* you believe PANR is fairly valued today then 88E ought to be trading at 0.197p on the morning of the second successful flow test result from Hickory-1. [371,300,000 (88E rec. barrels at Phoenix) x 10.77p (PANR value per barrel today) = £40m, plus £8.7m (Longhorn + Namibia) => £48.7m, divided by SOI of 24.73bn => 0.197p (v’s current SP of 0.245p).

*If* you believe 88E’s value of 14p per recoverable barrel in the ground at Project Phoenix is correct then (a) the SP will not move from 0.245p at the end of the successful flow tests at Hickory-1 and (b) PANR ought to be trading at 32.6p per share today.

Page 4; see above for Page 5

Page 3.

(iii) Namibia: once again, there’s insufficient data available to even begin to come a valuation for this asset. Remember that the operators will be using the cash paid by 88E together with the proceeds from their sale of 88E shares to fund the shooting of a 2D seismic survey scheduled for 2024. Happy enough to reflect management’s work on Namibia and ascribe US$3m to the investment in Namibia, US$3m being the total paid by 88E thus far. Therefore, I value Namibia at US$3m (£2.4m) plus option value.

(iv) Project Icewine West: examining recent presentations and referring to formal management guidance dated 10/11/20, I arrive at a P50/Best Estimate recoverable resource of 96mmbo. I used 88E’s 75% W.I., didn’t take account of royalties, applied management guidance for phasing risk & geological CoS & development CoS. This is a fairly gassy accumulation so perhaps worth re-assessing if/when the long-mooted Alaskan gas pipeline is financed. When examining the location, relative paucity of data plus the gas rich nature of this project, I cannot justify attaching any value to Icewine West at this time. There’s a reason it has sat idle since Charlie-1 was drilled.

(v) Project Longhorn: original purchase price for 88E’s W.I. was c.US$10m. There’s been further investment since then (capex + opex) and it’s become clear management’s plans for Longhorn have not been delivered v’s expectations at the time of purchase.

“I too have my doubts about some of our projects, Longhorn has been a slow burn despite the relatively high POO , when first announced Jan 2022 the wells were producing 300BOE per day, despite plenty of investment in workovers we are not producing much more today and nothing like the projections of 1300 BOE given as a medium term target.” – Brombarb on lse; 30/1/24 @ 16:58

hTTps://clients3.weblink.com.au/pdf/88E/02488695.pdf

a) Total investment by 88E (acquisition costs + capex costs) from 21/2/22 to the present day is US$15.66m (mixture of cash and shares, roughly half each). In addition, there’s a net exposure of c.US$4m from a debt facility to fund new Longhorn wells and workovers.

b) Distributions (or dividends if you like) from Longhorn to 88E in CY’22 = US$2.8m. This compares to 88E G&A (General & Administrative expenses, salaries mostly) for CY’22 of US$3.2m.

c) Distributions (or dividends if you like) from Longhorn to 88E in CY’23 = US$1.3m. This compares to 88E G&A (General & Administrative, salaries mostly) for CY’23 of US$3.5m.

d) Of concern is the dividend to 88E from Longhorn has fallen from US$980k in Q4’22 to only US$391k in Q4’23.

Page 3; see above for Page 4.

Page 2.

88E: I am using shares of issue (SOI) of 24.73bn and a mkt cap of £60.6m

PANR: I am using SOI of 1.038bn and a mkt cap of £260m. I have added 103m shares to the official SOI in order to fully dilute for the convertible bond outstanding debt of c.US$30m. The mkt cap in this case is therefore closer in definition to Enterprise Value.

88E: each recoverable barrel in the ground is valued by the equity market at 16.32p

PANR: each recoverable barrel in the ground is valued by the equity market at 10.77p

***Remember, this calculation was done on the presumption both of the upcoming flow tests at Hickory-1 are completely successful.***

Some readers will, not unreasonably, point out that 88E has other projects which, when taken into account, will have the effect of reducing both the absolute value ascribed to each 88E Project Phoenix barrel in the ground but will also narrow the comparative valuation differential between the two stocks. Let’s examine that logic.

88E’s other projects:

(i) Umiat and Peregrine: I value both of these projects at nil. There is only one potential buyer of these assets at time of writing and that is ConocoPhillips. Umiat and Peregrine will only be developed if Conoco extends its Willow/Harpoon infrastructure southwards. 88E is therefore the very definition of a price taker here. Conoco has its hands full for years, likely decades, developing and producing from their existing Alaskan assets. Umiat/Peregrine will have to offer superior IRRs v’s all Conoco’s other Alaskan assets currently being developed to make it interesting for Conoco. Umiat/Peregrine, as currently understood, is far from risk-free geologically and its isolated location means the IRR will be lower than all other known Conoco projects.

(ii) Project Leonis: not enough is known about this new acreage just south of Prudhoe Bay. It does look interesting to me but there’s just no data available to even begin to attempt a valuation. Therefore Project Leonis can only be categorised as option value for now. Worth keeping an eye out for news from Armstrong’s exploration activities this drilling season.

Page 2; see above for Page 3.

Comparative analysis of 88E and PANR.

The following analysis will be difficult for many members of this forum to read and will likely come as a shock to the majority. In cases of joint ownership of assets but where parties own unequal portions (by quantity and quality), equity analysts conduct comparative analysis in order to ascribe a relative valuation to the co-owners of the asset(s).

88E: for the purposes of this exercise I assume the upcoming flow tests of the Slope Fan System (SFS) and Shelf Margin Deltaic (SMD) at Hickory-1 are ***100% successful***, thus confirming the P50 (or Best Estimate) of 100.8mmbo and 168.5mmbo respectively. I use 88E’s 75% Working Interest of Project Phoenix and I do *not* deduct any royalty to the State of Alaska (SOA) and *nor* do I take into account management guidance on Chance of Success for SFS and SMD (50% and 81% respectively). I only use oil + NGL/condensate volumes because there is no commercial outlet for 88E’s gas at time of writing.

(i) Basin Floor Fan: 2C Best Estimate of 102mmbo.

(ii) SFS: P50/Best Estimate technically recoverable resource of 100.8mmbo.

(iii) SMD: P50/Best Estimate technically recoverable resource of 168.5mmbo.

Total: P50/Best Estimate of 371.3mmbo recoverable resource, of which 102mmbo (or 27.5% of total) is defined as 2C contingent resource.

PANR: for the purposes of this exercise I use PANR’s 99% W.I. (minus eSeis’ 1% ORRI) of the Ahpun and Kodiak fields. I do *not* deduct any royalty to the SoA and *nor* do I take into account management guidance on CoS of the new acreage acquired in the Dec ’23 lease auction. I only use oil + NGL/condensate volumes because there is no commercial outlet for PANR’s gas at time of writing.

(i) Ahpun “old” acreage: P50/Best Estimate technically recoverable resource of 476mmbo, of which 76.5mmbo are defined as contingent resources.

(ii) Ahpun “new” acreage: P50/Best Estimate technically recoverable resource of 363mmbo.

(iii) Kodiak “old” acreage: 2C Best Estimate of 953mmbo.

(iv) Kodiak “new” acreage: P50/Best Estimate technically recoverable resource of 623mmbo.

Total: P50/Best Estimate of 2.415bbo recoverable resource, of which 1.029bbo (or 42.6% of total) is defined as 2C contingent resource.

Page 1; see above for Page 2.

Page 6.

Downside from poor results at Hickory-1? Lots for 88E and none for PANR. How come? PANR doesn’t have any numbers in for the SFS horizon within their formal guidance so it’s all neutral to upside risk for that reservoir. The SMD? PANR’s base case for the SMD is already known from the data collected by the Talitha #A well located a couple of kilometres north (updip) of Hickory-1. When the PANR Exec Chairman described the implications of the Hickory-1 flow tests as a “free hit” for PANR this was an assessment grounded in science. Obviously if there are any disappointments from either flow test at Hickory-1, analysts (and I) will have to downgrade their numbers for 88E’s recoverable resources. That’s the downside risk for 88E.

I look forward to responding to fact-based questions concerning this comparative analysis. /end (6/6)

Page 5.

Question. Why is the market valuing a lower classification 88E barrel in the ground at a premium to a higher classification PANR barrel in the ground? Bluntly, this does not make any logical sense IMO. On the morning of 88E’s announcement relaying the results of the second (of two) flow tests at Hickory-1, will the market decide there is simply no justification for the premium value of 88E barrels in the ground? If the market comes to that decision, the 88E SP will fall from its current level, not rise. Yes, ***even if both flow tests are successful***.

Applying logic and the fundamentals to this investment process, in the short term the only reason to hold 88E over PANR is the hope that an ill-informed cohort of social media punters arrive to bid up the 88E SP in a speculative manner. I liken it to a game of ‘pass the parcel’…”Enjoy the party but dance close to the fire exit!” I submit that unlike 2021 and 2022 there is no sign whatsoever of that type of, mostly US-based, amateur trader. Does anyone disagree?

Longer term, 88E’s Leonis and Namibian assets *may* very well turn out to be brilliant, world class projects but we won’t know that until an immense amount of capital is raised to drill and collect the required data over a number of years.

I have read a few posts on this forum where the shareholder states that they’re interested in 88E rather than PANR “for the leverage”. I confess I do not understand this attitude in the slightest - for two reasons. Firstly, it is PANR that has the greater upside leverage in volume uplift across the combined acreage from the P50 (best) estimates to the P10 (upside) estimates. Secondly, and as repeated as nauseam on this forum, due to PANR’s portion of the shared reservoirs being *updip* from 88E’s portion, it is PANR which will enjoy a leveraged effect to *any* successful data from the flow tests at Hickory-1. Put simply, say the reservoir characteristics confirmed by the flow test of the SMD-B at Hickory-1 are better than 88E management expected. This data will have an *enhanced positive effect* for PANR because its share of the SMD is larger *and* it is updip of 88E’s portion, thus Dmax will deliver *leveraged* upside to PANR’s assessment of the SMD recoverable resource on their acreage.

Page 5; see above for Page 6.

Page 4.

When 88E management announced the acquisition of Longhorn in early 2022, regular readers will perhaps recall I posted that I could see the logic of the deal. If the dividends from Longhorn could cover 88E’s G&A (salaries, listing costs, office rent, travel, etc) then that would always keep the lights on - vital for listed E&P companies! As can be seen, Longhorn is requiring more capex investment from 88E than originally envisioned, all simply to stand still. And what has 88E gained in production volumes for that “extra” capex investment? In February ’22 gross production was running at c.300boepd and the gross run rate at the end of 2023 was c.370boepd. The guidance on acquisition was for Longhorn’s gross production to “double by the end of 2022”. By any measure, production at Longhorn has been a disappointment.

How to value Longhorn? Is it worth the total investment to date of US$15.66m? I wouldn’t have thought so, would you? The most recent bolt-on deal valued each reserve barrel in the ground at US$0.33. A readacross valuation would see 88E’s Longhorn net 2P reserves of 3.66mmboe valued at US$1.2m. That’s too low. Examining the underperformance of the assets since acquisition, it would be unreasonable to use the original price of US$4.70 per net 2P reserve barrel. Perhaps $2 per 2P reserve barrel? Call it US$8m (£6.3m)?

Deduct the Longhorn and Namibia valuations from 88E’s current mkt cap (£60.6m - £6.3m - £2.4m) and we arrive at £51.9m. Thus, the market is valuing 88E’s portion of the joint assets (co-owned with PANR) at £51.9m. Therefore, each of 88E’s Project Phoenix recoverable barrels in the ground is currently valued by the stockmarket at 14.0p. The equivalent value for each PANR recoverable barrel in the ground is 10.77p.

NB. THIS COMPARATIVE VALUATION IS CALCULATED AS IF IT WAS 8AM AFTER AN RNS DESCRIBING BOTH FLOW TESTS AT HICKORY-1 AS COMPLETE SUCCESSES.

Debate:

*If* you believe PANR is fairly valued today then 88E ought to be trading at 0.197p on the morning of the second successful flow test result from Hickory-1. [371,300,000 (88E rec. barrels at Phoenix) x 10.77p (PANR value per barrel today) = £40m, plus £8.7m (Longhorn + Namibia) => £48.7m, divided by SOI of 24.73bn => 0.197p (v’s current SP of 0.245p).

*If* you believe 88E’s value of 14p per recoverable barrel in the ground at Project Phoenix is correct then (a) the SP will not move from 0.245p at the end of the successful flow tests at Hickory-1 and (b) PANR ought to be trading at 32.6p per share today.

Page 4; see above for Page 5

Page 3.

(iii) Namibia: once again, there’s insufficient data available to even begin to come a valuation for this asset. Remember that the operators will be using the cash paid by 88E together with the proceeds from their sale of 88E shares to fund the shooting of a 2D seismic survey scheduled for 2024. Happy enough to reflect management’s work on Namibia and ascribe US$3m to the investment in Namibia, US$3m being the total paid by 88E thus far. Therefore, I value Namibia at US$3m (£2.4m) plus option value.

(iv) Project Icewine West: examining recent presentations and referring to formal management guidance dated 10/11/20, I arrive at a P50/Best Estimate recoverable resource of 96mmbo. I used 88E’s 75% W.I., didn’t take account of royalties, applied management guidance for phasing risk & geological CoS & development CoS. This is a fairly gassy accumulation so perhaps worth re-assessing if/when the long-mooted Alaskan gas pipeline is financed. When examining the location, relative paucity of data plus the gas rich nature of this project, I cannot justify attaching any value to Icewine West at this time. There’s a reason it has sat idle since Charlie-1 was drilled.

(v) Project Longhorn: original purchase price for 88E’s W.I. was c.US$10m. There’s been further investment since then (capex + opex) and it’s become clear management’s plans for Longhorn have not been delivered v’s expectations at the time of purchase.

“I too have my doubts about some of our projects, Longhorn has been a slow burn despite the relatively high POO , when first announced Jan 2022 the wells were producing 300BOE per day, despite plenty of investment in workovers we are not producing much more today and nothing like the projections of 1300 BOE given as a medium term target.” – Brombarb on lse; 30/1/24 @ 16:58

hTTps://clients3.weblink.com.au/pdf/88E/02488695.pdf

a) Total investment by 88E (acquisition costs + capex costs) from 21/2/22 to the present day is US$15.66m (mixture of cash and shares, roughly half each). In addition, there’s a net exposure of c.US$4m from a debt facility to fund new Longhorn wells and workovers.

b) Distributions (or dividends if you like) from Longhorn to 88E in CY’22 = US$2.8m. This compares to 88E G&A (General & Administrative expenses, salaries mostly) for CY’22 of US$3.2m.

c) Distributions (or dividends if you like) from Longhorn to 88E in CY’23 = US$1.3m. This compares to 88E G&A (General & Administrative, salaries mostly) for CY’23 of US$3.5m.

d) Of concern is the dividend to 88E from Longhorn has fallen from US$980k in Q4’22 to only US$391k in Q4’23.

Page 3; see above for Page 4.

Page 2.

88E: I am using shares of issue (SOI) of 24.73bn and a mkt cap of £60.6m

PANR: I am using SOI of 1.038bn and a mkt cap of £260m. I have added 103m shares to the official SOI in order to fully dilute for the convertible bond outstanding debt of c.US$30m. The mkt cap in this case is therefore closer in definition to Enterprise Value.

88E: each recoverable barrel in the ground is valued by the equity market at 16.32p

PANR: each recoverable barrel in the ground is valued by the equity market at 10.77p

***Remember, this calculation was done on the presumption both of the upcoming flow tests at Hickory-1 are completely successful.***

Some readers will, not unreasonably, point out that 88E has other projects which, when taken into account, will have the effect of reducing both the absolute value ascribed to each 88E Project Phoenix barrel in the ground but will also narrow the comparative valuation differential between the two stocks. Let’s examine that logic.

88E’s other projects:

(i) Umiat and Peregrine: I value both of these projects at nil. There is only one potential buyer of these assets at time of writing and that is ConocoPhillips. Umiat and Peregrine will only be developed if Conoco extends its Willow/Harpoon infrastructure southwards. 88E is therefore the very definition of a price taker here. Conoco has its hands full for years, likely decades, developing and producing from their existing Alaskan assets. Umiat/Peregrine will have to offer superior IRRs v’s all Conoco’s other Alaskan assets currently being developed to make it interesting for Conoco. Umiat/Peregrine, as currently understood, is far from risk-free geologically and its isolated location means the IRR will be lower than all other known Conoco projects.

(ii) Project Leonis: not enough is known about this new acreage just south of Prudhoe Bay. It does look interesting to me but there’s just no data available to even begin to attempt a valuation. Therefore Project Leonis can only be categorised as option value for now. Worth keeping an eye out for news from Armstrong’s exploration activities this drilling season.

Page 2; see above for Page 3.

Comparative analysis of 88E and PANR.

The following analysis will be difficult for many members of this forum to read and will likely come as a shock to the majority. In cases of joint ownership of assets but where parties own unequal portions (by quantity and quality), equity analysts conduct comparative analysis in order to ascribe a relative valuation to the co-owners of the asset(s).

88E: for the purposes of this exercise I assume the upcoming flow tests of the Slope Fan System (SFS) and Shelf Margin Deltaic (SMD) at Hickory-1 are ***100% successful***, thus confirming the P50 (or Best Estimate) of 100.8mmbo and 168.5mmbo respectively. I use 88E’s 75% Working Interest of Project Phoenix and I do *not* deduct any royalty to the State of Alaska (SOA) and *nor* do I take into account management guidance on Chance of Success for SFS and SMD (50% and 81% respectively). I only use oil + NGL/condensate volumes because there is no commercial outlet for 88E’s gas at time of writing.

(i) Basin Floor Fan: 2C Best Estimate of 102mmbo.

(ii) SFS: P50/Best Estimate technically recoverable resource of 100.8mmbo.

(iii) SMD: P50/Best Estimate technically recoverable resource of 168.5mmbo.

Total: P50/Best Estimate of 371.3mmbo recoverable resource, of which 102mmbo (or 27.5% of total) is defined as 2C contingent resource.

PANR: for the purposes of this exercise I use PANR’s 99% W.I. (minus eSeis’ 1% ORRI) of the Ahpun and Kodiak fields. I do *not* deduct any royalty to the SoA and *nor* do I take into account management guidance on CoS of the new acreage acquired in the Dec ’23 lease auction. I only use oil + NGL/condensate volumes because there is no commercial outlet for PANR’s gas at time of writing.

(i) Ahpun “old” acreage: P50/Best Estimate technically recoverable resource of 476mmbo, of which 76.5mmbo are defined as contingent resources.

(ii) Ahpun “new” acreage: P50/Best Estimate technically recoverable resource of 363mmbo.

(iii) Kodiak “old” acreage: 2C Best Estimate of 953mmbo.

(iv) Kodiak “new” acreage: P50/Best Estimate technically recoverable resource of 623mmbo.

Total: P50/Best Estimate of 2.415bbo recoverable resource, of which 1.029bbo (or 42.6% of total) is defined as 2C contingent resource.

Page 1; see above for Page 2.

22:37

Hi DUNX - well done on getting to 90, excellent innings so far!

Your post prompted me to have a look at the ISA and SIPP rules for overseas share investments. Like you I was gratified to read confirmation that providing a stock is traded on a recognised exchange (PANR are examining the NYSE and NASDAQ as options) then there are many UK ISA/SIPP providers who can administer such holdings. That's good news for sure.

On further examination, and I'm 100% happy to be corrected here, these providers will ensure the investor signs a W-8BEN in order to set up such an account for holding US shares. I *think* but am *not* certain that CGT *may* be deducted by US authorities at source (15%?) on future shares sales and UK investors therefore *may* have to apply for a refund from the US if their UK tax-protected product is to truly deliver the mathematical/practical "protections" which motivated the investor in the first place? I'm the opposite of an expert in this field so am happy to learn from someone who has the relevant expertise and experience.

It's not an overly urgent matter, far from it. David Hobbs talked of a potential US listing in 2025 and further described an overlapping period of another year or so (I think, correct?) where a dual listing was likely to remain in place. Hmmm....I'm guessing the majority of UK shareholders are invested in PANR to (hopefully) deliver substantial capital gains and that many (even a majority?) have invested via their ISA/SIPP vehicles? It would therefore be a shame *if* the hoped for substantial capital gains had to be taxed, kinda defeating the ISA/SIPP motivation in the first place? But perhaps I'm misunderstanding the whole idea.

Either which way, I would hope (even expect?) the PANR BoD would consider carefully the loyalty shown by long-standing retail shareholders when making decisions about continuing a UK listing for more than a temporary period, especially if there are negative tax implications. Good stuff but definitely not urgent!!

16:35

Hi alfista - I'm not sure you're correct to assume there'll be no drilling this calendar year. Of course I agree that financing and further independent external validation from Netherland Sewell are vital - and we're told to expect news on that front in Q1 and Q2 of '24. However I would think it imperative, on the presumption finance is indeed secured, that management get moving pdq on further appraising Ahpun and Kodiak in order to deliver the flow rates which the industry models suggests are possible/probable.

I'm sure you'll be happy to take my word on the following. Fund managers do not commit fresh capital to E&P and junior mining companies for that cash to sit for months/years on a company's balance sheet. They absolutely hate that type of fundraise because it's effectively admitting to their own underlying investors that they cannot beat the cash rate applicable at that moment in time. Take it from me, fund managers will not be supportive of junior resource companies who don't plan on using that capital on operations in the near future.

I presume the same goes with oil field service firms (OFS)? They're hardly likely to go through months of costly due diligence only for their vendor finance (akin to a voucher for work?) to sit there unused?

Have another listen to the latest webinar of last week and re-examine the accompanying slides. We learnt from Bob and David that Megrez has already been identified as the likely location for the next roadside pad. Both the Alkaid-2 and partially permitted Megrez location could very well be used to drill eastwards underneath TAPS and the Dalton to intersect the Ahpun East accumulation.

If you re-listen to the webinar it's clear Bob and the technical team can't wait to appraise the Ahpun East acreage because they assess it is "wholly conventional" in nature. *If*, and I repeat if, a drill confirms their modelling and delivers flow rates of 3000-4000bopd then the equity market will have no choice but to finally acknowledge the inevitability of PANR's discovery becoming a commercial oil field. Analysts will then re-assess the risked and unrisked NAV --> the mkt cap will appreciate massively, which in turn makes future financing easier still.

So, in summary, I'm pretty sure that *finance dependent* PANR will be drilling from the roadside in H2 '24. It's worth remembering that one of the huge advantages of PANR's acreage is the ability to access the subsurface 24/7/365 from the disturbed corridor on each side of the Dalton Highway. PANR would surely be mad not to take full advantage of that year round access and the cheaper rates which apply for kit and personnel during the traditional drilling off-season.

[From distant memory the disturbed is either 2.5 miles or 2.5kms on each side of the Dalton but I would 100% welcome a correction from anyone who knows for sure.]