re: moby float analysis *warning* Rockdoctor's comments in...

re: moby float analysis *warning*
Rockdoctor's comments in quotes

"Ian, you demonstrate some interesting points."

Thank you.

"However, I agree with you that $3.8m is cheap for the well and it is most likely to be in excess of this."

Nahh, it's less than 100m of water. We're talking a relatively cheap offshore drill here (ie 3x the cost of an equivalent onshore play).

"You notice in the prospectus that Moby pay the first 3.75 and then BSOC pay from 3.75 to 5.75 whereby all parties (Including EBR pay pro rata after that). This capping aleviates a lot of risk for Moby and allows the float to succeed."

The main risk isnt in cost-overruns. The main risk is that the play misses, or comes in at the lower end of expectations ... at what Moby are paying, hitting BSOC's Low number for gas (10 bcf, cited in Independant Expert's report) means at 35% of 10 bcf gas @ NPV$1m/bcf, Moby only just get their money back ... and thats assuming minimum costs to produce the gas.

"There is a quid-por-quo in the promote that Bass Strait has assigned its 10% free carry from the second well, Gilbert-1, that Lakes Oil are paying for to Moby i.e. Bass Strait keeps no interest in Gilbert-1 and assigns Moby its 10%. "

If Moby misses, I cant see too many people keen to drill Gilbert-1. And expecting Lakes Oil to have the money to drill it is pretty darn optimistic.

"I still see Moby as the best entry to the Moby feature, which looks as the lowest risk gas prospect in years - the other option is Eagle Bay as Bass Strait is not listed."

Why is Moby Oil at 3:1 a better deal than Eagle Bay on a free carry ? EBR certainly covers the downside risk better (and offshore wells miss a lot more often than they hit).

"The Chairmans letter explains quite clearly that Moby is essentially a 'spin-off' from Bass Strait and Albers companies are partially underwriting the float to $4.5m. I see the whole thing as simply a 'staged' capital raising, with priority entitlements and offers to Bass Strait and Eagle Bay shareholders."

Follow the money ! BSOC get a 40% free carry for every punter dollar that goes into Moby ... as well, the Chairman's letter does not explain why the decision to spin Mobby off as an independant entity was made, as opposed to the more straight-forward path of listing BSOC itself.

"If it is such an attractive offer to Bass Strait as you belive then there won't be many shares available, but somehow I doubt they will all take up their subscriptions and hence there will be shares available to the rest of us"

The key is the 40% carry BSOC gets on Moby-1, not the value of Moby Oil shares for BSOC shareholders !