memo and independent valuation, page-2

Hi Ronsteib,

Re the valuation - I actually think they (SRK) have been too conservative: They assess Artemis on an 'unrisked upside' number of only 4Tcf (MEO has cited a P90 figure of 8Tcf and p50 of 12Tcf) which they then multiply by a factor of 0.89c/GJ for risk. In other words 1.78% of the normal 50c/GJ risked. Given MEO states that Artemis has a 32% GCOS, (which SRK lowers to 13% without detailing the RPS reasoning) to lower the multiplier to 1.78% - on a figure half the p90 estimation - is hugely conservative.

They do something similar with Braveheart - although given the COS is estimated at 6% for Gas and 6% for oil (no mention is made whether these are mutually exclusive) and they use a p10 resource number rather than 1/2 of a p90 this 1.78% multiplier is not unreasonable. Interestingly they end up with a valuation for Braveheart ($20.4m or 6.58cps) almost identical to that given to Artemis ($22.2m or 7.16cps).

It really is a shame the RPS survey hasn't been made public.