Nice investor update today which makes BYE look very cheap. The...

Nice investor update today which makes BYE look very cheap. The following post from BELLAS on the OEL thread is very good reading. Hope you don't mind me sharing your post Bellas. Cheers Slabbo

1. Yes, Little T, Page 8 of the report is very informative and shows just how ridiculously low the current share prices are for BYE, OEL (and MEL.) Just to summarise, BYE has calculated the Present Value (discounting future cash flows at 10% pa) for the total of 1P, 2P, 3P and Prospective Resoures - for its 40.6% Working Interest in SM71 at US$136 million. Convert to A$, then deduct tax (nominal rate in US is 30%, effective rate for O&G industry is about 20%, but I've used 25%) and we get the value of A$138 million after tax. This value is unrisked ...ie it doesn't allow for the possibilities of problems that may make the reserves unobtainable, or more likely, doesn't allow for the possibility that after drilling, the reserves will be found to be greater than originally estimated...as we saw with SM6 and SM 71. You've suggested that the more likely reserves will be 25% higher because of the conservative estimates by Collarini and BYE directors. So what's the value of only SM71 to OEL shareholders (assuming US$50-60 per bbl and up to $2.59 for gas as per the study)? For OEL - which has the same WI share as BYE in SM71 - the value calculates at 12c per OEL share. (A$138 m PAT / 1.2 bill shares) For BYE, the value is 55 c per BYE share. Note that these are Present Value, after tax and after royalty. (Royalty is paid to the State by way of the 18% 'take' from gross production.) We can now also guess a reasonable value for Biv Peak..it has larger estimated reserves, but not yet drilled, and lower capex to link production to transport pipelines. So we can say that for each company, we can double the value of SM71 to get a total for both. (It seems production from Biv Peak won't be far behind that of SM71...so the PV calcs for both will be very similar. And now we can also guess the value of Eugene Is...a little less than SM 71...and for which OEL no doubt will exercise its right to participate. So the value of the three GOM fields to OEL is about 36 c per share, or SIX times the current price....on Present Value!!! And the value of Tanzania and Alaska could double the value again??? The major risk for oil producers may be that the price of oil may fall to $40 per bbl - but even at this price, BYE/OEL would still be making very high profits in the GOM because the cost of discovery and development in established areas is so low. The market will eventually wake up.