Here is an extract from the Proactive Active Investor article referred to in my last post.
It starts out by quoting the latest announcement, then goes onto say:
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House broker RFC Ambrian reckons that a meaningful flow test should now take place within the next six to 10 weeks.
Ron Miller added: “Further analysis of the fracture stimulation programme and production data will be needed to quantify the reservoir deliverability.”
RFC Ambrian notes the one million cubic feet per day (cfpd) initial production rate of the nearby hydro-fractured Cambay-73 well, and says Cambay-77H could have an initial production rate of anywhere between 3-5mln cfpd, by its estimation.
“Our modelling suggests that anything above 3MMcfpd is likely to be commercial at the current budgeted well cost (US$13.2mln). If well costs can be brought down to US$10mld in a full field development, then we estimate that the commerciality threshold is even lower (around 2.3MMcfpd). We estimate that
Oilex’s interest in the Cambay Tight Hydrocarbon Project is worth US$183mln (A¢24.0/share, 13.2p/share), assuming a 50% chance of full-scale development,” the broker’s number crunchers declared.
The shares are currently trading at around 6.75p, up 0.4p on the day, still some way short of RFC Ambrian’s valuation of 15.3p after the broker doubled its fair value estimate from 7.7p.
“We think that the equity market is continuing to discount the chance of success of this ‘proof-of-concept’ tight gas well excessively. We also believe that the equity market is placing no value on
Oilex’s Canning Basin licences [in Australia], which seems harsh given the industry’s interest in the basin over the last few years,” said Stuart Armor, RFC Ambrian’s
Oilex coverage man.
Armor also believes the recent election of a BJP government in India is likely to be good for the sub-continent’s economy in general and the energy sector in particular.
“Low domestic gas prices (US$4.3/MMBtu) have contributed to the nearly 40% decline in Indian domestic gas production over the last four years. We think Modi’s strong electoral mandate could allow him to be more successful than previous prime ministers in reforming the energy sector and tackling the widespread price subsidies/distortions that have led to significant underinvestment in the upstream petroleum sector,” Armor suggests.
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I've just realised that I'm probably verging on borderline obsession with OEX. I've been living with it like a hair-suit for years now that it's become a chronic affliction, a type of addiction. It's moved on from being a hobby or an interest. But it's not such a bad obsession, if you're going to have one. So please, just bear that in mind when you read my posts.
