RE: Ithaca Energy Enters Into Farmout AgreementsI don't agree with the farm outs, particularly for Manuel. Manuel has ~90MM bbl potential. Paying 20% of a ~$20MM well (~$4MM) for the chance to get ~18MM bbls of reserves adjacent to a production facility with spare capacity seems nutz to me. If successful, that $4MM could translate into hundreds of millions of near term cash flow.
Perhaps paying 100% to get 20% might be reasonable. Unless Manuel is an extremely poor target, I simply don't understand the rationale of farming out a drill ready prospect on such poor terms. Companies like North Sea would never have access to such good prospects if they had to go it on their own - they'd never get the rigs, never get the land.
I wonder if IAE use Monte Carlo simulations in these decisions? Somehow, I think they just pulled the farmout terms out of their arse.
North Sea management are smart cookies. IAE management seem to have their head where the sun don't shine.