Valuation gamesYeah everyone,
Lets all remember the oil game. Flow rate is all about how fast can i get the oil out. Depending on drilling costs the flow rate is a huge factor. In Kurdistan where the average well i $100 million then 5-10,000 is not a huge home run. 50-100,000 is a big homrerun. If you are drilling a hole for $10 million and it does 5-10,000 a day that is a huge homerun and low risk as much less capital outlay upfront. The first one provides risk cashflow to drill 9 more to equal the cost of one Kurdistan well. If even half of those hit you have a Kurdistan home run for much less risk than the single hole in Kurdistan. That being said whether it is the single hole by Vast doing 100,000 b/d or 10 wells in Colombia doing 100,000 combined the other huge question the market asks is HOW LONG WILL IT FLOW? So reserves become the other half of the pie. At 500 million barrels you would burn the field out in about 14 years at 100,000 b/d. At 1 billion you have 28 years or double the production. Any combination of productioin/life gives you reserves. So obviously the larger the reserve the bigger the the two numbers get. A multi billion barrel discovery combined with big flow rate is the grand slam homerun. If you had 75-100,000 b/d on a field recoverable reserve of say 2 billion barrels then the share price should be worth at least $7 but more like $10 a share. Thats a huge longshot but its the right country to be looking in! How do i get that? Well on that kind of flow rate they could get 300,000 barrels a day by drilling 4 more wells. The half billion in drilling costs get returned from the initial productiuon. Then we have 100 million barrels a year. Less royalty and the low end PSC numbers we get 90% times 16% times 37% we get a final 5.3% on 300,000 is @16,000 barrels a day NET to Vast. At say 2/3 profit we are at 10,000 times current price of $95 is about a million a day in free positive cash flow. $365 mkillion a year before taxes to play with and find oil or gas! Thats another NIKO or almost $15 to $20 a share! Nice dream but i will happily take a fraction of either and a $2 share price. We will all know soon enough! GLTA and Happy Canada Day!
Longrider