Member Info for Soundingoff

That's correct Dingdang. but that's just the rathole for the TAGI. Nothing to do with the Palaeozoic:

2. n. [Drilling]
Extra hole drilled at the end of the well (beyond the last zone of interest) to ensure that the zone of interest can be fully evaluated. The logging tool string may be as much as 120 ft [36.5 m] in length, so the rathole allows tools at the top of the logging string to reach and measure the deepest zone of interest. In addition, there is usually a small amount of extra hole drilled to allow for junk, hole fill-in and other conditions that may reduce the effective depth of the well prior to running logging tools.

dsmit- TE10 was always a smaller TAGI target with a wider strat play. We were also drilling the Palaeozoic, but that changed with TE9. The 19th November RNS changed the objectives.

That sounds like more inside info Mickey? Blimey, you're brave.

Algo sells as well. There hasn't been a broker sell in the last 30 minutes...

Thanks for your thoughts Prudent.

I have previously given thought to your second point and have broken it down further.

We know there are many targets and each one will have an expected value and risk profile. For example, I believe SBK is expected to be an 80 BCF target (someone correct me if I'm wrong), but this will have a lower risking (higher COS) than an untested target. It may not sound like much, but from previous comments from Brian, I would expect the COS on this drill to be closer to 40-50%. All IMO I may add.

Following this method further, we can apply it to the extended TE5 Horst. TE8 was too far, but what lies beyond the immediate horst?. I believe we expected 3-4TCF proven from TE8, but we had 1-2 TCF denoted at (admittedly assumed on my case) a lower risk.

All the drills prior to Sound's TE6 will positively affect the risking of the seismic in those areas. Whether the drills reduce the COS or simply allow more efficient targeting, they still increase the value of the data.

Finally the Lackhbir High of .4TCF GOIP would be prominent on the list, with us initially linking it to the TE5 horst.

I fully believe that the field has significant value to a Buyer. It is a route map to further exploration and gas. There may be a relatively high cost of exploration due to the properties we are experiencing, but in comparison to chasing small TCF numbers offshore or in less fiscally advantageous areas, the opportunity is too large.

We are going for the largest prizes head-on. We can debate whether or not that was the correct strategy, but frankly I think it's only fair to assess this after the event. Clearly that may not be compatible in terms of investing. But this does not change the fact that we have a large scale basin study. To suggest it has no value goes against all the principles I have worked with over the the last 20 years+

trellis- I think Prudent's statement is valid and is only repeating what we have been advised to date.

Agreed crude. Hopefully the CC can clear it up.

SoundInvestor- Brian's comment is his view as far as we are aware. However the actual value of the exploration (as opposed to the geological side of the exploration) is JJ and JP's domain. They have the final say on that, and they have both contradicted what Brian suggests. My own view also contradicts Brian's one line comment.

crude- Don't forget Brian's latest statement is a contradiction to what he said previously in Aug '17.

My view is that it was a one line comment and does not tell the whole story. Plenty of businesses have sold on part drilling/part seismic and so I have no doubt the exploration has value. The only question is how much?

It would be good to see your thinking on a SOTP valuation prudent. I've given it some thought, but not really put it all down formally. Far better than the sentiment driven posting assuming we are worthless.

Indeed Prudent. I have made the point previously that we are told we have more than 50 targets on the structure. With time and money, this field is very attractive to a business with the means to progress.

It is what it is Fellrunner. This strategy always had risks with it, some more transparent/opaque than others.

Neptunes- I'm not sure any clarity is required, but I'm talking about our next drill in the series being the best drilling target available.

FYI, prior to TE9, both TE9 and TE10 had the same COS. So it wasn't as you state, but we were certainly told it was our best target on the permit.

Pedantry matters.

Not an opposing view as such Fellrunner, but TE9 and 10 are separate plays. We know what the main issues were with TE9 and some are not relevant to TE10.

As Brian said- "The seismic is not allowing us to easily predict the presence of tight vs porous TAGI facies and requires far more analysis."

So without a significant pause in operations, I can't see what we can change? TE10 is still the best target ignoring the Palaeozoic (and advice to come). Further lengthy analysis may allow us to differentiate better, but it may not.

My view is that I don't think we have the option to pause and that we are sold shortly, whether we deviate slightly or not. We have a existing discovery, some lower risk targets (SBK etc) and shortly a basin study with 50+ targets. Unless you, or more importantly a Major believe there is no more extractable gas, then that study has value. Each target will have a risked value. How much is impossible to say outside of Sound HQ and other interested parties. Either way, it will be a very attractive package for a Major with some cash and time to spend on the seismic or simply stick the drill bit in the ground. The only question is the price.

If I don't hear anything to the contrary before/during the CC and the spud of TE10, that that will galvanise my view further.

I think they've left the desert and decided to populate this board...

Final point eric.

It's of no relevance to me whether you think NPV calcs are the right mechanism for valuing the Horst or not. What is relevant to me is that is how the O&G industry values the asset. Your view is therefore moot.

The share price has no relevance to the Horst NPV, calculated on industry standards. End of story.

The only thing that matters is what someone is willing to pay for it, not what our SP is right now. I could show you many listed companies that have a massive disconnect between their market cap (SP * number of shares in issue) and NPV, earnings etc. And that works both ways and is affected by sentiment, future expectation and many other factors.

JP trading plan? What relevance does that have to our discussion? I like to have a debate as it helps look at things from a different perspective. But why bother with someone who wants to post negatively at all costs? Sorry to say, that's how it looks from here.

Have a good evening.

Eric- We're posting on a BB. It's often not easy to get the meaning of posts. I was simply being factual. You have been arguing (quite reasonably I may add) about something that you don't understand. I can't get my head round that.

We'll have to leave it there, as you're arguing against reason and fact in my view.

Eric- I'm afraid you don't understand the basic concept of a discounted cashflow.

You ask why shouldn't they put the money in a low yield asset at 1.5%? The simple answer is because this asset has been calculated at a discounted cashflow rate of 10% (NPV10). This means they will earn 10% on their capital rather than the 1.5% you suggest.

https://www.investopedia.com/terms/n/npv.asp

Yes there is risk, but that risk will transfer to a buyer. It's the nature of the game. That's not OUR worry.

10-15% off for the GSA at the moment, that's it.

It's not JJ saying it, it's the INDUSTRY standard. It's how it is, so forget about JJ. Have a read up on NPV10 and the O&G industry.

With respect, your last paragraph suggests I'm just not getting across my point to you. There will be no real margin reduction because this is a validated development and is accepted as such. The risk transfers to the buyer. The development may not meet the production profile or it may perform well in excess. That's the nature of the game and why significant conservatism is built it. Your suggestion of the reservoir porosity and permeability is already built in to the figures.

People are trying to add discounts to discounts, and with respect, it is incorrect. It's not about opinions, it's about industry standards. Those are being applied and the value is the value as stated. There are no further discounts other than a small one right now for the GSA.

My third sentence should say we have proven the Horst development with drilling, seismic and the EWT.

The Horst is classed as an existing discovery. It is not exploration, but development. We have proven the Horst development with the EWT. The size is accepted at an average 377bcf per the CPR. On the back of this, we have the development concession. Whilst there is always a risk the field will not perform as expected, it is valued as such. That is the nature of the beast.

Also bear in mind that we have reduced our recovery rates to 50% from the CPR figure of 58%. We also calculated 40bcf per well during our EWTs, but are using 26bcf IIRC in the development concession. This concession is very conservative for a reason. Here is where your risking occurs. This reduction factors already knock off over 30% value from what was calculated from the CPR and our EWTs.

By definition further risking is not warranted, other than a small one for certain factors. For example, right now a small risking would be applied as we do not have the GSA.

The tying up of the money is inherent in a discounted cash flow, which our value has been calculated on. Emphasis on the discount, which using standard O&G metrics is 10%. This is the cost of tying up your capital and you simply cannot discount again as you are suggesting. Remember this is development capital and not exploration. As has already been mentioned by JJ, we could negotiate an NPV8 or 8% discount which would uplift us by 20%.

This is my understanding, and as always am open for discussion.