So, with Friday’s (Sept 9th 2011) announcement of a significant Zaedyus discovery what could this mean for investors in Tullow, Northern and Wessex? Note all analysis is based on info/opinion in public domain in an attempt to arrive at a $/bbl valuation of the discovery, apply some NAV risking and adjacent prospect “derisking” as appropriate.

(i)          Zaedyus Only

See link http://db.tt/jFa6z0y for a rough ‘n ready economic model of a 900 MMBO STOOIP and 40% recovery or 360 MMBO “reserves”.

  1. Using following assumptionsfor fiscal regime (FG terms are generous 33% tax and no known offshore production royalty although these could change as the extent of Zaedeus becomes known).

 

Note fiscal terms for Surinam and Guyana are nowhere near as generous and I haven’t used the cost escalator (i.e. set at 0%).

  1. 2.     Key results of model

 

So NPV10 of each bbl in the ground is worth unrisked $17/bbl, and by applying a 70% COS to account for uncertainties/assumption inaccuracies ..etc then$12/bbl seems reasonable for this discovery in this FG block, given the excellent fiscal terms.

Applying this to key data for Tullow/Northern Petroleum and Wessex Exploration shareholders I get the following

 

 

So, on a risked basis, 82p to Tullow & 7p to Wessex, 36p to Northern Petroleum seem OK to me but this is a full field “risked” economic model and both these minnows need to raise funds to stay in the game so neither companies may see this full assigned risked value.

(ii)        Derisking of adjacent prospects

Other prospects within the fiscally lucrative FG block have all been derisked as a result of this discovery. Where formerly 10-15% COS were being used then this would now increase to 25-35% depending on how optimistic a mood you are in. I used 30% below and $17/bbl before “risking”.

 

  

(iii)       Summary

For Tullow Oil the news is even better as they have acreage in adjacent blocks and there is also the effect of further derisking of the Liberia-Sierre Leone-Cote D’ivoire WATM fans so THE recent SP rise, even accounting for the CNOOC takeover rumours/Uganda farm-down progress and retrace after mid August sell off, would support a risked 200p quotient of the recent 450…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here