RE:SP potential if well hits?As a start, and at it's most basic level, valuation should be based off of the asset, namely proved up reserves of stock tank barrels (STB), but market always knows its own ways. Personally I will not sell at any price less than true and correct valuation of Bouhajla+Ktittir as a whole. BHN alone is worth at least $2 to Dualex and $1,5 to Africa H, at any flow-rate above 500 bopd. A higher flow-rate is ofcourse better as cash-flow will be proportionally higher, up to the natural restrictions of tubing and trucking (early on) and the point of how freely they will let it flow while still remaining within the boundaries of good production practice. Dualex has taken care to pick a drill-location for BHN-1 that is far enough from any wrench faults that the issue of early water-influx is (hopefully) adequately offset, and thereupon a relatively high potential flow-rate may be allowed. (At SLK the water probably originates from an aquifer in the Triassic, far beneath the Abiod, flowing up through wrench faults and into the reservoir as oil is produced and the pressure differential effect reaches the faults. The further a well is from the fault system the less severe this pressure draw-down will be in the wells early life as a producer.)
"In the short run, the market is a voting machine but in the long run it is a weighing machine."
~ Ben Graham
As BHN alone will be worth >~$500m net to the twins at NPV10, at current reserve estimates (which is likely to increase if BHN-1 becomes a producer, as they intercepted more Abiod than anticipated), and seeing as this is the markedly smallest of the prospects, it doesn't take alot of imagination to figure out that Bouhajla+Ktittir as a whole should be worth somewhat more as derisked exploration assets.
- Morten