Ann: Conventional Portfolio Update, page-19

Agreed Ex....it is hard to know where this farmout deal will fall within the spectrum (or is it matrix?) of possibilities.  But no harm in speculating, right? 

Rightly or wrongly, there are a few things that I am expecting. All based on the premise that a 'successful' farmout will provide the first step in unlocking value for existing shareholders and also provide resources to continue the unlocking journey.  So, reimbursement of back costs via an upfront cash payment, while significant and more than useful to 88E, are almost insignificant on a potential per bbl basis, and even more insignificant in terms of the quantum of de-risking already achieved and the potential prize identification achieved.  Hence I would expect that getting this is a given.  Maybe even with a reward factor/multiple included given the implied ROI?  The amount of WI we give away will be directly related to the amount of free carry we get (& up front cash received) and the number of wells that this applies to. And again the sheer size of the resource potential comes into play here as success case scenario fixed costs are spread over a large base hence driving down the per bbl economics.

Frankly, I would like to see a farmout deal where we have limited contribution requirements to confirm discovery and delineate the asset.  So an optioned, multi-well free carry.  It may require us to farmout as much as (say) 80% of the gross (for conventional only). Bearing in mind that while the farminee pursues the conventional proving over possibly 2-3 years (winter only on the Tundra), we try to commercialise WB and YG and further the HRZ case.  Meanwhile, if the conventional farminee sees some success then our 20% WI in that play could be worth many multiples of our current share price.  Just based on recent OSH transactions and on possible POO trends.

Of course, if we can retain more than 20% then so much the better, as long as the funding contributions to maintain WI are both manageable, and not distractive from being able to pursue a parallel exploration journey to the conventional  farminee (i.e HRZ, WB, YG).

Who knows!! I guess we all will soon enough.  All IMO & GLTA.