Running through the numbers, both seem very cheap. A great time to buy OEL and BYE.
The recent F3 announcement suggests to my inexpert understanding that they have at least double the conservative oil reserves estimated by the auditors in mid-2016 that was made on the basis of only one well – so life of field should not be a problem to the profitability and return to BYE and OEL. The natural field decline in production can be eliminated by adding new wells nearby in SM 71 and by a tie-in of additional wells, if capacity platform processing capacity is still available, from the new leases acquired last year…. So a good 10-15 years production as a minimum at 4,500 bpd or 1.6 million barrels per year, of which BYE and OEL each share 40.6% with the rest going as government royalty.
The main risk now seems to be whether the oil will flow readily from the host rock. The info the JV has presented is that flow rates should not be an issue – it’s one of the best prospects they have seen in the GOM…but this can’t be proved until it IS flowing. First well will be producing in March, next two within a month, but some risk may be perceived by the market that the final production will take slightly longer than expected…but only a month??
Next risk may be the price of oil…but with the US economy going so well, as is the rest of the world’s, can’t see oil demand declining much near term. So expect a minimum of US$60 per bbl plus for West Texas Intermediate (WTI) and add at least $5 for the SM71 product (Louisana Light, or Sweet.)
Cash cost reputed to be ~ US $7 per bbl, or ~ US$10 mill pa – for a skinny crew on the platform (4 men? full time x four shifts? Ron/Strat – comments?) = $2.5 mill, plus helicopter in/out, supplies, maintenance, power ….my guess is that $10 mill or $7 per bbl is reasonable.
So, for each of BYE and OEL, their 40.6% share of 4,500 bpd x 360 days a year, is 660,000 bbls, plus gas worth about 3% of oil revenues ~ at US $65 per bbl L Light, is US$44 mill pa EACH. At US$.76, is A$58 mill pa revenue EACH.
Cash income to each of BYE and OEL is US$65 –$7 per bbl, or A$52 mill pa.
Other fixed (and already incurred costs) will be for depreciation and amortisation of the platform and wells costs over say 10 years, ~ $7 per bbl, plus corporate admin costs
BYE market cap at 27 c is ~$185 mill, so the cap to annual cash flow of $52 mill is a ratio of only 3.6 times before corporate overhead. As mentioned previously, BYE and OEL are unlikely to have any Aussie tax to pay for many years due to past losses. BYE has heaps of other opportunities to double/treble production with likely success in its other leases. A bargain.
OEL market cap at 5.4 cents is $83 mill, or add ~ 10% with dilution of CN’s and options. Cap to annual cash flow of $52 mill is a ratio of only 1.7 times before corporate overhead. OEL at present has only minor additional drilling prospects in GOM (50% WI in SM 74 or South Vermillion) but has the largest interest in the potentially massive Biv Peak lease at 45% and potentially massive Alaska prospects. A bargain.
BYE Price at posting:
27.5¢ Sentiment: Buy Disclosure: Held
