Ann: Transforming New Standard Energy , page-117

Again looking at the EFS deal.

To retain this wonderful land they have to drill 2 wells every 6 months.

And I believe they have 55 well locations defined and at a cost of USD 7.0 million each = a total investment of USD 385 million or in other words a 12 years of drilling.

Now lets assume all these wells have been drilled and on production right now what is the value of oil per year at 400 boep and assuming no rate decline ?

55 wells x 365 days x 300 boep net x USD 85 per barrel of oil = USD 512 million.

So they are risking USD 385 to return after a year USD 512 or a profit of USD 127 million or a 32% return.

Now this is a very simplistic deterministic approach and oil will flow for more than a year but no one invest in an oil exploration company that might give you such a small return vs the risk.

That right NSE will no longer be an exploration company it will be a boring production company that if every thing goes well could make a small profit.

My recommendation is to bring back Sam and reject this deal outright.