RE: PC Sales and export deal27 Mar 2025 21:37
Just catching up on the day's conversations. Funnily enough, I asked Grok about valuations the other day:
Adjustments and Market Considerations
Upside Potential: If Heron-2 and Gazelle-1 succeed, reserves could exceed 30 million barrels, pushing NPV toward $250-300 million. Exploration prospects like Gobi Bear-1 (100 million barrels potential) could further enhance Block XX’s value, though they’re unproven.
Buyer Discount: Buyers often pay less than NPV for operational risk or to negotiate farm-ins. A sale might fetch 70-90% of NPV, or $150-190 million.
PetroChina Deal: Proximity to PetroChina’s Block XIX facilities and existing cooperation reduce infrastructure costs, potentially making Heron more attractive at the higher end of this range.
Final Estimate
Based on current data and conservative assumptions, I’d value the Heron field at approximately $150-200 million for a full sale as of March 24, 2025. This reflects a 25 million barrel reserve base, $40/barrel netback, and a discounted cash flow adjusted for Mongolia’s operational context. If Petro Matad proves higher reserves or production rates, the value could rise to $250 million or more, but that’s speculative without further drilling results.
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Then I asked the same question, but with a successful Gobi:
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Adjustments and Considerations
Development Costs: A 100-million-barrel field requires significant upfront investment (drilling, facilities, pipelines). If we assume $5-10/barrel in capital expenditure (common for onshore fields), that’s $500 million to $1 billion undiscounted. Spreading $750 million (midpoint) over 5 years at 12% discount reduces NPV by ~$550 million, adjusting the value to ~$500-600 million. However, since this is a sale valuation, I’ll assume a buyer factors this into their offer rather than directly subtracting it here.
Production Scalability: Achieving 6.25 million barrels/year (17,000 barrels/day) requires infrastructure beyond Heron-1’s current setup. PetroChina’s proximity could mitigate this, supporting a higher NPV.
Market Value: Buyers might pay 70-90% of NPV for risk, suggesting a sale range of $735-945 million, though a proven 125-million-barrel field could command closer to full NPV or more if competitive bidding occurs.
Final Estimate
Assuming Gobi Bear-1’s success at 100 million barrels, increasing total recoverable reserves to 125 million barrels, the NPV of the Heron field (and Block XX assets) would be approximately $1.05 billion as of March 24, 2025, before additional development cost adjustments. For a sale, I’d estimate a practical range of $800 million to $1 billion, reflecting market discounts and PetroChina’s strategic interest. This assumes the $40/barrel netback holds and production scales efficiently.
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