Substantially Undervalued, O&G Situation in play, page-116

Continuing on regarding VOBM#1 ...............

I should have said for anyone interested that the well from the Double A Wells field that I'm mainly using for the comparison's is Carter, W. T. & Bro (API number 373-30845, lease ID for production data 161596).

I'm going to do EUR's for VOBM#1 of 1.4MMboe & 1.7MMboe just to give you something to compare.

I'm going to use constant oil & natural gas prices to make things easier for now of $45 & $2.50. It's important to note that nearly 40% of all oil production will occur in the first year, so the near term oil price is perhaps much more important than people currently realise (I'll include myself in that until I saw these true production decline profiles) in working out the value of each well. Close to 20% of all oil production occurs in year 2.

A mere 27% of all Natural gas production occurs during the first year as a comparison.

The 1.4MMboe EUR, (which means using 6.045 MMCFGD & 494 bod as the IP numbers, gives total production of 6.285BCFG & 355,173 BO) has a total revenue of U$31.7M, then deduct U$7.25M in landowner royalties, U$6M for LOE's etc (I want to use $6M as a base number due to the well cost rather than a straight U$4 per boe [which would have come to just over U$5.6M] & 4% for the state U$ 0.95M.
Giving a safe figure of U$22.8M to the Working Interest owners.

Thus VOBM#1 should be worth U$11.4M net to PANR in this scenario and payback is achieved between months 7 & 8 on well costs of U$5M.

The 1.7MMboe EUR, (which means using 7.3 MMCFGD & 600 bod as the IP numbers, gives total production of 7.590BCFG & 431,380 BO) has a total revenue of U$38.38M, then deduct U$9.60M in landowner royalties, U$6.75M for LOE's etc (which will be slightly higher than in reality) & 4% for the state U$ 1.15M. Giving a safe figure of U$27.6M to the Working Interest owners.

Thus VOBM#1 should be conservatively worth U$13.8M net to PANR in this scenario and payback is achieved in just over 6 months on a U$5M well cost.

Both these valuations will be on the conservative side, because they do not take into account the added value of the NGL's that will be extracted in place of some of the natural gas.

Again just for comparison because I mentioned the possibility of EUR's of 2.15 MMboe in that broker report from last week, the model gives the following data - IP's of 9.1 MMCFGD & 745 BO for total production of 9.46 BCFG & 535,635 BO. Thus giving total revenue of U$47.6M less U$11.94M, U$8.45M (probably U$1M+higher than it will be) & U$1.43M respectively. Giving a very safe figure of U$34.5M to the Working Interest owners.

Thus an average well in this scenario should conservatively be worth U$17.25M for a 50% WI and reach payback in just over 5 months.

LOTM