RE:JUNE-15-2020: CITI UPGRADES APACHE, CITES SURINAME UPSIDEFinally got my hands on the Citi report and it states the following:
"We estimate that the embedded value of Suriname within Apache’s stock currently stands at ~1.5-2 large FPSOs, which the first two successful strikes on the block may support. We believe this could rise further to 3-4 large FPSOs with continued exploration success. Each large FPSO is worth ~$3.5-$4 per share to Apache. While exploration always bears material risk, results from exploration well #3 (likely announced within ~30 days) and #4 (likely announced ~75 days post) could reveal a development fairway post the west-to-east delineation across Block 58. Few other stocks within our coverage universe offer such a material catalyst."
With Apache having approx. 377M shares outstanding - a discovery offshore Block 58 (net to Apache's 50% interest) translates to roughly US $1.3B to US $1.5B. Gross value of a single discovery (100%) ranges from US $2.6B to US $3B.
Assuming CGX have two prospects in the Northern Corentyne Area of similar scale - un-risked potential (using Citi's methodology) ranges from US $3.5B to $4B (CGX having 66.7% interest). Risked potential (say 30% PoS) ranges from US $1B to $1.2B.
Lot's of ways to slice and dice these numbers - but, as Citi states, few other stocks within its coverage universe such a material catalyst.
When you read research report likes these from Citi - it makes you believe Total got one heck of a deal by farming into the block. As part of JV deal, Total willing to pay the first US $6B in development costs, agree to an oil price based royalty, agree to pay 50% of all costs incurred on the block to date, and pay Apache US $100M. It would seem Total really got an exceptional deal.
GLTA