HRZ Shale Decision Tree, page-87

I forget now someone was asking me if the breakeven 88E supplied was about right. Sorry if I haven't directly replied to your question but on my ipad it's hard to scroll back and forth in the message boxes.

In the States they usually trade shale leases on a dollar per acre basis. Now on a full-cycle basis, like this project, if you got good cashflow of $10,000 per acre I'd say that feels about right. At the height of crude price, there were leases in L48 going for five or six times that. Remember this is full cycle. On a well by well basis, the return of each well, in an established area, is real high. Above 20% for sure. But that is once the project is established, in a region where export is already happening and also, where flaring is allowed.

I think going at it alone early is best for returns (good for 88E shareholders now), but also means a lower sale cost if the seller wants to exit pre-development (that is, the full cycle returns are shared between buyer and seller). Given Oxy and Chesapeake did just that and lost out (oil price didn't help though). EOG on the other hand, did real good business because they stuck at it and kept finding all those sweet spots.

I don't know is the long answer, obviously after that ramble. If I look at it as a acreage buyer, I'd say something in the order of $500 to $1,500 per acre would not shock me (maybe the higher end of that range would) for something unproven (this vapors), in AK, and not so far into even an exploration campaign. But that is hard cash. Which then leaves them to explore their conventionals in AK (I really like them) or in other parts - I think one response alluded to this being their strategy. Wins all round!

Thanks all.