av a look at this!, page-2

Thanks Poyndexter...

Here’s some calculations I did

Important figures I drew from Western gas to do the calculations:

*First
From Western Gas 2004 annual report
4600 wells drilled in Powder River over several years
1630 wells drilled in Big George, main target for Esponda
730 were producing gas at a total rate of 30 million CF day
That’s 41Mcf/day = 3750 Mcf /quarter (I’ll use this later)

*Second: Western gas state that average cost $1.49 per Mcf for findings and producing.
I assume costs of $2 per Mcf for PGS – due to lack of economies of scale, need to subcontract out basic services, don’t equipment etc.

*Third: average price received by PGS was $US9.29/Mcf
Therefore, average profit rate per MCF is assumed to be $9.29-$2 = $7.29 (I’ll use this in my calculations).

Fourth:

East Esponda 10344 acres and has a total of 21 wells
West Esponda 14490.5 acres…it has 10 pilots and could POTENTIALLY have 30 if spaced like East Esponda (it looks bigger on the map...but I tracked down announcements which listed the sizes in hectares and acres).

***Annual Profits from Oriva Tenement***

Oriva Throne
21408 Mcf/quarter = $US156064/quarter = $US624256/year
- if the 9 wells being dewatered come on line = $624256 x 24/15 = $US998809/year

**If Oriva Federal produces at same flow rates as Oriva Throne 33/24 x $998809 = 1.373363 million/year

(not a safe assumption really…I’ll ignore Oriva Federal because they don’t seem to be in a rush to develop it)

***Annual profits from Esponda tenement***

There are no flow rates from Esponda so I’ll figure it out annual profits using 1). Oriva average flow rates PER WELL and then 2). using average flow rate PER WELL for Western Gas

1. East Esponda and West Esponda (Assuming it produces at Oriva rates per quarter)
- 35239 per quarter from 15 wells = 2349 Mcf per well per quarter from Oriva

East Esponda
21 well producing at Oriva rate = 2349 x 21 x $7.29/Mcf = $359608/quarter
**Annual profit from East Esponda = $US1.438433/year

West Esponda
- tenement is 1,449 times bigger than east tenement
**Therefore, assuming Oriva per well flow rates again, annual profit equals
1.449 x 1.438433/year = $US 2.084289 per year

**Total annual profit from whole tenement – $US3.522 million/year

2 . East Esponda and West Esponda (assuming flows at Western Gas Average in Powder River Basin)

Average quarterly flow rate for Western Gas Powder River well is 3750 Mcf/quarter (2349 MCf/Quarter for Oriva)
Therefore annual profit would be (3750/2349) x $US3.522 = $US 5.622 millon a year

Western gas says average well produce for 7-8 years. Lets assume 5 years at these rates.

Total resource value of Oriva Throne and East and West Esponda (not NPVed):
Using Oriva flow rates to estimate Esponda worth – (3.52+.998) x 5 years = $22 million/.75 (i.e. exchange rate) = 30 million aussie dollars
Using Western Gas average flow rate: (5.622+.998) x 5 years = $33 million/.75 = 44 million aussie dollars

Of course I have only used 5 year production, but at current market cap of $46million, it doesn’t scream out buy unless they can get a few more tenements. One thing that leaps out is the size of Western Gas, which has economies of scale and diversity on its side (i.e. some wells are good and some are bad). We still not sure whether PGS have got the scraps…you would assume the areas which have the most potentially (as far as you can tell without drilling that is) have been drilled. Anyway, make of this what you will. I’ll be watching this one closely when those flow rates from Esponda come out.

Please feel free to tear apart these figures...its always difficult to make assessment without hard flow rates.