It really amazes me that this company is still trading at these levels after the news we had yesterday regarding the Lustre field oil strike.
IMO I think the market has missed the importance and the value of this first up oil strike.
Lets look at the maths.
Doing some research the well cost $1.5m to $1.7m to drill and complete. Ok we have approx 216 bopd. This is a natural flowing well guys. Whats going to happen when it goes on a pump? Wow! I’ve been told we will conservatively have a 50% increase in bopd and if we are blessed we could have 100% increase in flows. This is crazy stuff!
Lets take oil at $80 to help work out the $$$
At $80 we need to allow the cost of trucking and storage and royalties at $20 per barrel
That leaves us with $60 per barrel.
If the conventional well produces 300,000 barrels over its life its nearly $18m of net income after royalties and transport costs from this one well. This is also allowing for a decline rate of 10% a year. From the announcement
“Vertical wells can be drilled cheaply and with a low decline rate the wells should payback in less than 6 months at current oil prices and are economic at very low oil prices”.
We have 16 more to drill that have the same structural characteristics as the one just drilled. Ill let your imagination do the rest.
When the time is right the big boys we are in bed with will strike and take us out IMO. These guys are interested in reserves in ground. That’s what counts.
I’m licking my lips thinking of the horizontal wells
The following from the AOW website.
Unconventional Programme – near term activity
- Horizontal drilling program of Ratcliff pay zone
- JV: AOW, Great Western*, Anadarko Minerals
- 100% free carry on first two horizontal wells.
- Option for 2 more horizontal wells with back in right.
- Low cost back in on two additional wells.
- Max drilling and completion cost of $5m.
- Horizontal wells economic (PV10) at 250 bopd.
- Expected EUR’s of 200 – 500mbo based on production from horizontal Ratcliff wells in adjoining counties.
- Low decline rate on unconventional wells
- Proven Producers for up to 20 years
And to really get your attention major companies are paying between 18,000 to 30,000 an acres for proven plays. If Apog has 63000 acres in the JV say $15,000 an acre that's nearly one billon dollars. Apog 22% gives
$220,000,000 just on the northern star play that's around $1.50 per share,do your numbers if we get $20,000 an acre.
