and again, institution increased their holding, page-3

Heres a great post from one of our UK brethren, thumbs up to Ultrapunch -

I came across this Valuation Formula whilst reading through the Sino Gas presentations, of which there are many! They like their presentations do Sino Gas!

Sino Gas give this industry Rule of Thumb for valuing unconventional gas deposits.

Valuation = (A$2m x (1P + 2P) + (A$2m x (10%(3P + 2C))

where the 1P, 2P, 3P and 2C figures are the number of billions of each category

Initially LRL will only have a 2C resource

For example if LRL have a best estimate 2C resource of 60% (their share of the PSC if PetroChina take up their option of 40% at the development stage)) of 1Tcf of gas. That's 60% of 1000Bcf = 600Bcf. Hence the number of billions is 600

Putting that 600 in the formula we get

Valuation = A$2m x (10%(600)) = A$120m

Converting that into GBP we get £78m.

Add to that LRL's cash pile of £30m and we get £108m which corresponds to a LRL sp of 43p

Unfortunately the Sino Gas Mkt Cap is currently less than the Valuation given by their formula in which case that 43p target might not be reached. We might have to settle for, say 30p, on a 2C figure (best estimate) of 1Tcf of recoverable gas. Assuming a 25% recovery factor that means a gas in place (GIP) figure of 4 Tcf.

If the GIP was 8Tcf (2C = 2Tcf recoverable) as a best estimate we could be talking of a 2 x £78m + £30m (their cash pile) = £186m Mkt Cap for LRL

That's a 74p sp for LRL. Again it might be lower than that if the current Sino Gas Mkt Cap is anything to go by since it's less than the valuation given by their formula.

To make use of this formula RISC are going to have to come up with a best estimate of GIP and a likely recovery factor on wednesday. That would then give a best estimate 2C contingent resource figure to put in the formula to give a guide to the likely LRL sp.

http://www.iii.co.uk/investment/detail/?display=discussion&code=cotn%3ALRL.L&thread=10218340&it=le