lets try to up this board a bit... Its like watching a bunch of 3 year olds here. We got guys saying nil to over $1 per share. Can we put some realism, some facts, and opinions based on something tangible.
My view and its only my view.
KRG has a dispute with Iraq on who is running the better program for maximizing their resource - the PSC vs the Service contract system. They have a vested interest in ensuring success on their process.
No one can argue that Longford has struggled as operator. The PSC clearly only allows a1 year extension to the exploration phase which is made up of a first and second sub period. The PSC clearly requires seismic and 2 wells drilled by June 30 2012. To move from the first to the second sub period, this needs to be met. The only extension is to the second stub period. If the first sub period is not met, game over. the lack of petroleum law will not stand up as all of the operators in Kurdistan are operating in the same environment and have not sat on their hands during their exploration period.
Genel does have a vested interest. As partner, they will live or die on this PSC on the actions of the operator, Longford. If one misses, they all miss. The incentive for Genel in this deal is to both protect their interest and increase their holdings. They will have a tight turnaround to complete this deal.
I grant you, Longfords 40% profit oil capacity building committment is steep but keep in mind, Genel has a 30% commitment on all of its existing leases, including their holding in Chia Surk plus Taq Taq and Tawke. Therefore, while this would be a factor in the ultimate price, it is not something alien to them.
Furthermore, looking at the recent psc's issued by Repsol, Hess, Marathon, etc, all of these enteries have a $60 to $100MM+ initial buyin and a future commitment of profit oil ranging fromn 20 to 40% depending on the contact. This is again is not alien to the psc's in the region and has actually become more prevelant on the most recent contacts.
So based on nil activity on the block, I would argue the better metric to look at is the recent psc assignments with prices ranging from 60 to 100mm with a 20 to 40% commitment. Based on this, less the $25MM outstanding Longford payable to the KRG, I would estimate an enterprise value of $35 to $75MM. This would work out to ~
.20 to $.40 per share assuming 182MM shares outstanding. I would venture to push this towards the higher end of the value due to the fact their is a discovery on the lease vs some of the raw wildcat exploration lands out there. Putting a value on resources is difficult at this time due to the ticking time bomb of the PSC.
I do not believe Longford has any influence on this and is scrambling to monetize this. Technically, since the y have not paid the $25MM owing, they are in non compliance with the contract and can loose it. Genel is the white knight here. The chances of another party coming in, Exxon, the Chinese is low. With the political turmoil between South Iraq service contracts and the Kurdish PSCs, there is a low probability you will see a major with activity in the South step in. The Exxon response has not been good and if anything, has driven the two sides apart resulting in further delays in passing the iraq oil law.
Just my thoughts.
I look forward to your thoughts and discussions on this.