Im Back

Hey guys



Been a long time between drinks and time to get ALL OIL up and going again as there are heaps of things i am keen to be discussing and kicking around for debate.

Like to welcome the new comers and hope that you pick up some good stuff from this blog and feel free to add comments or ask questions as they arise.
One quick thing i would like to draw to everyone attention to is Orion Petroleum Limited OIP . This little company has a few blocks in NSW and a current market cap of $9.3million but the thing that sparked my interest is they currently have $11,000,000.00 in the bank so their market cap is well below their cash backing, some weekend research could be very rewarding here.



We are also about to see a little US company float on the ASX Maverick Drilling & Exploration Limited. These guys look great and will be listing with the code MAD. Have been following them for a spell now and they are currently in a full field development plan of 400 wells on their Blue Ridge oil field and with completion of this field it will be producing around 10,000bopd. The kicker here is their very low cost drilling at only $200,000 to complete a well and they are aiming at getting in 6 wells in a month with a flow rate of 25bopd using 2 drill rigs.



I ran the DCF over them and tested their business plan many different ways and 2 warning came up which are as follow


•2 warnings came up in the IRR an DCF
•If drilling costs blow out to $400,000 per well
•If oil falls below $60.00 a barrel
•1a. Due to the set up of the company and there low cost operation it seems a good investment but with a blow out in drilling costs to $400,00.00 puts considerable pressure on the operation. This would be 100% increase on their current budgeted costs but still only $200.000.00 above those figures. The $300,000 seems to indicate a break even in the IRR with some small dilution in the market cap also indicated at this cost rate per well. Investors are advised to check and cross reference quarterly development expenditure with wells drilled for that quarter to ensure costs are being maintained at the budgeted amount. 2a. If the oil price falls below the $60 mark again this puts pressure on the operation. $60 is not an indicator to sell. What needs to be established is the long term trend. If this trend indicates less than $60 a barrel then revaluation is advised



I have also been working hard on the technicals of how to valuate oil fields to get a price book value which i will share over the coming weeks as i strongly believe that Eromanga's block 430 will be taken out by Galp once UBX complete Manga. Just cant see them going into a splitting of production agreement with us.

There is a ton of chatter going on in the world about the big oil spill off the US gulf coast so we will be taking a very close look at this to see how this could impact our on shore companies which we mainly follow on ALL OIL.

Anyways hope everyone is safe and well and families are good

See you all soon

Cheers

Ciggys