Valeura Energy Inc. T.VLE

RE:Where in the world can you get a return like this

[theSwede99]

Investor2233 wrote: From CEO.ca

"In development mode, tight gas does have steep decline rates, but once you have multiple pads going, your flush production just blends into your overall production profile. And what does it cost to build the pad and drill those wells? At $8 million a well in full development (remember that we’re not even talking about horizontal wells here in this example), that’s $64 million per pad. Now, what if you had 5 or even 10 pads going like that? Even with declines you’re talking about 0.5-1.0 BCF/d of production (100% basis) that’s throwing off at least $4/mcf in cash flow (again, never mind the condensate). That’s $2-4 million a day, or $700 million to $1.4 billion a year… and what’s the capex for that? $320 million for a 5-pad case and $640 million for a 10-pad case. Then you have to add in capex for pipeline tie-ins and some processing facilities… let’s just throw $300-500 million at that. Seem fair? All-in, in very, very rough numbers let’s just say that initial development costs a cool billion dollars and then you’re up and running for 20-30 years or so (365 BCF/year at 7-10 TCF recoverable). Payback is maybe a year-and-a-half or two in the above example once you’re operationally and logistically prepared. Where else in the world could you spend a billion dollars and have it come back to you that quickly? And how about the next year when your facilities capex is out of the way and you’re just doing maintenance drilling? Two words. Gravy train. That’s how I think a supermajor (Statoil 100% or Statoil+1) could turn one billion dollars into billions here. It’s embarrassing to actually put numbers like this out there at this stage because it’s so early, but unless I run some kind of hypothetical economic case, how am I to know when I think Valeura is under- or overvalued based on the data that I have to work with?"

-Malcom Shaw blog