Nice read27 Dec 2018 16:04
AAOG - BROKER VALUATION
Finncap Broker Note - Jun 2018
Https://goo.gl/qvQrFR
We have separately modelled the three different target horizons for the upcoming TLP103 well using the PSC terms detailed in Appendix I, a Brent oil price of US$65/bbl in 2018/19 and $70/bbl flat long term, and a 10% discount rate. Given that the production infrastructure is largely already in place, capex is mainly limited to future drilling/workover requirements on the different reservoirs. We also phase the capex so that it can be funded from operating cash flow. The CPR assumes fixed opex of US$62,650 per annum with variable opex of US$4.12/bbl in all of the scenarios.
R1-R2
For the producing R1/R2 reservoirs, we assume plateau production of 250 bpd is reached in 2021 with a well workover performed every other year to maintain output. Net cash generated in this case is ~$2m per annum once plateau production is achieved, generating a NPV of $13.2m or 6.3p/sh.
Mengo valuation
For the Mengo we have considered the Best (8.1mmbbls gross) and High (23.8mmbbls gross) contingent resource cases laid out in the CPR. For each, we have assumed Mengo wells have an IP of 800 bpd, but quickly decline to ~500bpd before stabilising at a more modest (10% p.a.) decline rate. The number of development wells required varies from five in the Best case to 13 in the High case, with 2-3 wells drilled per annum. We have assumed $3.5m for each well resulting in drilling costs of $18.5m and $50m for the Best and High cases respectively. This gives an unrisked valuation for the Mengo horizon of $68-169m (30-75p/sh), or 18-45p/sh on a risked basis.
Djeno valuation
For the Djeno, we have modelled the Best (15.9mmbbls gross) and High (42.3mmbbls gross) prospective resource cases as per the CPR. While neighbouring wells in the Djeno have achieved flow rates ~5,000 bpd, to be conservative we have assumed each well produces at 2,500 bpd with an initial decline rate of 25% p.a., moderating to 15% p.a. after four years. The number of development wells required varies from four in the Best case to 10 in the High case, with two wells drilled per annum. We have assumed drilling costs of $4m per well with an additional $2.5m capex for storage/topside facilities and $8m to connect to an export terminal. This gives development costs of $30.5m and $54.5m respectively for the Best and High resource cases, or $1.9/bbl and $1.3/bbl.This gives an unrisked valuation range for the Djeno horizon of $156-360m (69-159p/sh), or 16-39p/sh on a risked basis.
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