results announcement, page-3

Revised the well flow rate assumptions as follows:

1. Adopted the following decline rates (t = days):
   • Year 1 (i.e. 30 days to 365 days): Hyperbolic decline with b=1.10, d=0.65%:
   • Year 2-3 (i.e. days 365 to end of Year 3): Hyperbolic decline with b=1.10, d=0.65%:
   • Year 3 onwards: exponential decline, d = 5% (per month)
2. As per last model, I have applied these declines to each of SEA’s wells to develop a monthly oil production profile (based on the decline). Where we have been provided with an IP rate, the oil production is based on:
   • Oil production = IP (boe) x oil % x decline equations
3. The gas production is based on the same curve – but scaled for the gas component as follows:
   • Gas production = Oil production / oil% x (1 – oil%) x [ ratio of GOR scf/bbl] / 1000
4. NGL is based on gas production x [ratio NGL Yield bbls/mmcf]
5. Assumed NRI of 90% (Applied to the production profile)
6. Assumes 6 wells per quarter

Note these assumptions / results may not be error free and subject to the usual caveats - conduct your own due diligence).


Model 1 Results

Model 1 results in the following metrics – (green is SEA estimates).
I think the IP360, IP720 and IP1,080 are much more aligned to the what the production profile now.



Note – SEA has achieved significantly higher results than the expected case – all the blue (Commiited in Q1) and grey (expected in Q2-Q4 2019) conservatively adopt the expected rates.



Whilst the 4Q modelled production here aligns with that issued by SEA, the full year 2018 production is only 2.45 million boe (Which is lower than that reported by SEA).
Under this model, Enterprise value based on DCF (At 12% discount rate) less debt is $1,100M AUD = $1.55 (at $60 WTI). At $65 WTI from 2020, comes up with Enterprise value of $1,450 AUD = $2.10.


The following is the expected production by month for 2019 demarcated by well (i.e. red = 2018 in production, legacy, blue = committed in Q1, grey/black = expected in Q2,3,4 based on 6 wells a quarter) under this model.





Under this model, average production levels are maintained by the new wells and 2019 production would be 6.0 million boe (much higher than last year’s 3.7 million boe).

I am expecting 2019 EBITDA of around US$150M, with 2018 EBITDA around US$70M.

After revisiting the declines curve and model, I am still very comfortable with the potential value uplift that can be had here.