RE:Nice little jumpLet's have some fun for a couple minutes and justify these $5-10 shares.
Looking at Frontera Nov 2020 PPT (using Dec 31/2019 values):
1P Total = 115 million barrels... but not all of this will get produced near term.
1P PDP (Proved Developed Producing, ie... infrastructure is in place and paid for)= 40 million barrels... best type of reseves and what companies are valued on these days of low oil.
1P PUD (Proved Undeveloped, ie...no infrastructure is in place yet)= probably close to 75 million barrels.
1P PDP NPV10= $758 million.
1P PDP NPV10/1P PDP= $18.95/barrel.
1P PDP NPV10/Outstanding Shares= ~$7.77 (makes the current share price of $3.61 seem low, but what else is new with the oil industry. Everything is depressed).
Anyway, let's look at CGX/Frontera Guyana Land
- Let's assume the best 3 identified prospects on Corentyne/Demerera have a total in-place volume of 1.5 billion barrels (i.e., 500 million barrels/prospect). Of course, not all of this oil gets produced (hence why the catergories of 1P/2P/3P and CR). Assuming a recovery factor of 30%, that leaves us with about 450 million barrels recoverable oil (150 million/project).
Let's assume we will recover all of this 450 million barrels (and hence get 1P PUD classification):
- Infrastructure cost to get us 1P PUD ($15/barrel as per recent Exxon Payara)= $6.75B
- 1P PUD NPV10 (using Frontera example of $18.95)= $8.52B
* So in essence, NPV 10 minus infrastructure cost = $1.77B (or ~$6.5/share).
* Of course, NPV could be higher for Guyana offshore (taxes, royalties, brent oil prices, CAPEX/OPEX, etc all need to be accounted for, but using Frontera baseline works for now).
Now of course, exploration costs (~$150-200M) will be needed to just drill initial wells to discover these projects before any infrastructure is even discussed. But very high-level, $6-7/share is a fair starting point if we believe in the seismic presented in October, offsetting discoveries, and regional Guyana geology. As many know, if a solid JV did occur and people/day-traders got excited, pushing the share price well above $10/share could easily occur due to short-term excitement and very low amount of shares actually available. Either way, even a $3-4/share price would leave me very happy.
I know De Alba has these facts (plus many more) in front of him. No doubt the banks/potential JV partners looking at all of this information also have this information and are using it to come to a fair deal while discussing terms. I just hope he does the right thing and makes a deal happen. Land like this need to be drilled. Having a potential 1P PDP NPV10 of around $8.5-10B is no joke but we need money to see this happen.
Anyway, I am done posting for the remainder of 2020 unless exciting JV news comes out. Everything I have thought with regards to CGX/Frontera have been presented the past couple months (good and bad as everyone knows) and I see no more value in discussing anything without further news. Most importantly, I wish everyone on here a healthy and happy Christmas!