Here's the 3rd part of my spreadsheet analysis of what a rough guess at
UNRISKED development value might be. I looked at 3 scenarios at $60, $80 & $90 Cdn Oil and $2 Gas as well as using the performance & PV10 values from the two type wells talked about in my Part 2 post (namely IBR's P50 "Type Well" and my own modified "80 Stage Hz" type well using adjusted Initial Rates and Oil/NGL yields gleened from IBR's May 17th press release. As with the prevous 2 parts please note that this is work is based on much more assumption than real world data and although I'm striving to give as realistic glimpse at what I see IBR's corporate value becoming -
this work can also be wrong so please take everything with the slightest grain of salt. For the development scenario I assumed an average of 11 wells per year drilled after 2018 (where 4 wells with the new design have been drilled) for a further 20 year development period (not very aggressive - I know). Some years were higher than 11 and some were lower but the idea was to keep the average gas rate at a stabilized plateau - which occurs incidentally in the year 2022 (about 5 years from now).
Here's a review of the yields and type well reserves used for this exercise:
| | Reserves / Yields | |
| | Type Well | 80 Stage Hz | |
| Oil | 300 | 381 | mbbls |
| Gas | 5.8 | 4.45 | bcf (sales) |
| NGL's | 147 | 125 | mbbls |
| Ngl yield | 25.3 | 28.0 | bbl/mmcf |
| Gas Shrink% | 0.0% | 0.0% | |
| Total MBOE (Calc.) | 1413.4 | 1247.8 | |
| % Oil & NGL's | 31.6% | 40.6% | |
| % Oil | 21.2% | 30.6% | |
| % C5+ | 4.2% | 4.0% | |
| %C3 | 2.6% | 2.5% | |
| %C4 | 3.6% | 3.5% | |
The two type curves (IBR's P50 "Type Well" and the modified "80 Stage Hz" were then used with the following Hz drilling schedule to achieve a stabilized gas rate by Year 5:
| Year | # of Hz's Drilled |
| 1 (2018) | 4 |
| 2 | 9 |
| 3 | 13 |
| 4 | 15 |
| 5 | 15 |
| 6 | 12 |
| 7 | 10 |
| 8 | 10 |
| 9 | 9 |
| 10 | 10 |
| 11 | 10 |
| 12 | 10 |
| 13 | 10 |
| 14 | 11 |
| 15 | 11 |
| 16 | 10 |
| 17 | 11 |
| 18 | 10 |
| 19 | 11 |
| 20 | 10 |
| 21 | 10 |
| | |
| Total Wells | 221 |
| Avg # of Hz's/Yr | |
| After Yr 1 | 10.9 |
Using the type curve performance trends (see my 2nd post) with the above drilling schedule the following Total Average Annual Production Rates for Elmworth was created:
| | Oil Rate Bbls/D | Gas Rate MMCFD | NGL Rate Bbls/D | Total Rate MBOED |
| | Type Well | 80 Stg Hz | Type Well | 80 Stg Hz | Type Well | 80 Stg Hz | Type Well | 80 Stg Hz |
| Year |
| 1 | 999 | 1,655 | 21.5 | 19.3 | 544 | 541 | 5.1 | 5.4 |
| 2 | 2,721 | 4,508 | 58.6 | 52.6 | 1,482 | 1,474 | 14.0 | 14.8 |
| 3 | 4,684 | 7,760 | 100.8 | 90.6 | 2,551 | 2,538 | 24.0 | 25.4 |
| 4 | 6,415 | 10,627 | 138.1 | 124.0 | 3,494 | 3,475 | 32.9 | 34.8 |
| 5 | 7,620 | 12,623 | 164.1 | 147.3 | 4,151 | 4,128 | 39.1 | 41.3 |
| 6 | 7,819 | 12,952 | 168.3 | 151.2 | 4,259 | 4,236 | 40.1 | 42.4 |
| 7 | 7,710 | 12,772 | 166.0 | 149.1 | 4,200 | 4,177 | 39.6 | 41.8 |
| 8 | 7,781 | 12,890 | 167.5 | 150.4 | 4,238 | 4,215 | 39.9 | 42.2 |
| 9 | 7,587 | 12,568 | 163.3 | 146.7 | 4,133 | 4,110 | 38.9 | 41.1 |
| 10 | 7,752 | 12,841 | 166.9 | 149.9 | 4,222 | 4,200 | 39.8 | 42.0 |
| 11 | 7,744 | 12,828 | 166.7 | 149.7 | 4,218 | 4,195 | 39.7 | 42.0 |
| 12 | 7,669 | 12,705 | 165.1 | 148.3 | 4,177 | 4,155 | 39.4 | 41.6 |
| 13 | 7,559 | 12,522 | 162.7 | 146.1 | 4,117 | 4,095 | 38.8 | 41.0 |
| 14 | 7,699 | 12,754 | 165.8 | 148.8 | 4,194 | 4,171 | 39.5 | 41.7 |
| 15 | 7,739 | 12,819 | 166.6 | 149.6 | 4,215 | 4,192 | 39.7 | 41.9 |
| 16 | 7,560 | 12,524 | 162.8 | 146.2 | 4,118 | 4,096 | 38.8 | 41.0 |
| 17 | 7,771 | 12,873 | 167.3 | 150.2 | 4,233 | 4,210 | 39.9 | 42.1 |
| 18 | 7,611 | 12,608 | 163.9 | 147.1 | 4,146 | 4,123 | 39.1 | 41.3 |
| 19 | 7,822 | 12,958 | 168.4 | 151.2 | 4,261 | 4,238 | 40.2 | 42.4 |
| 20 | 7,649 | 12,671 | 164.7 | 147.9 | 4,166 | 4,144 | 39.3 | 41.5 |
| 21 | 7,591 | 12,575 | 163.4 | 146.8 | 4,135 | 4,112 | 39.0 | 41.1 |
| | | | | | | | | |
| | | | | | | Avg MBOED Yr 5 Onwards | 39.5 | 41.7 |
To estimate Total Project NPV value I used the NPV10 values from my previous 2nd post for the two different type wells with pricing scenarios for oil of $60, $80 & $90/bbl with gas flat at $2. Those NPV10 values were then multiplied by the number of drills for each year and then re-discounted for a Project Total NPV10 value for each scenario. Since Excel does not automatically provide a "mid-point" NPV10 value that industry people like to see I needed to average start & end period NPV10 values to get the mid point values. I then made a wild guess that another $100 million in capex will be needed to expand facilities to accomodate 40,000 boed of production that was subtracted from the Total Project NPV's and divided that number by the number of IBR shares outstanding to get a range of share values. Finally I estimated was the corporate value would be in terms of $/boed's using those share prices and averaged stabilized production. That Table is as follows:
| EST. ELMWORTH DEVELOPMENT VALUE ($/Share) BASED ON ~11 WELLS/YR (UNRISKED) |
| | | | | | | | |
| | | $60 Cdn Oil $2 Gas | $80 Cdn Oil $2 Gas | $90 Cdn Oil $2 Gas |
| | | Type Well | 80 Stage Hz | Type Well | 80 Stage Hz | Type Well | 80 Stage Hz |
| | NPV10 Avg Single Hz ($M) | $6,351 | $9,473 | $10,925 | $15,270 | $13,212 | $18,169 |
| | NPV10 Total Hz's ($MM) - start yr | $575 | $858 | $989 | $1,383 | $1,196 | $1,645 |
| | NPV10 Total Hz's ($MM) - end yr | $633 | $944 | $1,088 | $1,521 | $1,316 | $1,810 |
| | NPV10 Total Hz's - mid point | $604 | $901 | $1,039 | $1,452 | $1,256 | $1,727 |
| | | | | | | | |
| | Est. Facility Expan Cost ($MM) | $100 | $100 | $100 | $100 | $100 | $100 |
| | Est. Net Value/Share | $3.25 | $5.17 | $6.06 | $8.72 | $7.46 | $10.50 |
| | Stabilzed MBOED's (Yr 5 onward) | 39.5 | 41.7 | 39.5 | 41.7 | 39.5 | 41.7 |
| | Company Value per Stablized BOED | $12,768 | $19,215 | $23,790 | $32,442 | $29,301 | $39,055 |
Keep in mind that the above values are UNRISKED which means that the actual realized value for the above scenarios would likely be lower. However light oil is currently at ~$86 Cdn ($66.50 WTI) even after a couple of days of Saudi/Russia tree shaking so focusing on the two $80 Oil scenarios (Avg Price of $7.39/sh) could be viewed, In my opinion, as a possibly conservative scenario especially when some big Banks believe that oil will spike to $100 US next year regardless of what OPEC does.
My whole point of posting this spreadsheet analysis is to show a clearly reasoned perspective of IBR value from a somewhat knowledgeable outsider and demonstrate that there is a ton of future value to be realized by shareholders. This is a similar work-up to what competitors and potential bidders will do to determine their level of interest. I believe that the current $0.90 to $1.00 target prices aren't even close to the actual present value of IBR - especially when taking into account how the street is valuing other Montney operators multiples of time higher. Please feel free to challenge or point out flaws. It's always a good thing to generate discussion and bring in different perspectives to give balance. I think it will be a very interesting 2nd quarter and good results from the two new Hz's will reduce risk further which will do wonders for the share price!