Its a bit difficult to value OIP given so little drilling has actually been done in the 2 years since they floated. But both Moree-1 and Kurrabooma-1 found 4-5m gassy seams .. although strangely even after 6 months we have not heard what the analysis of core samples came up with regarding gas desorption. Seems also strange that they didn't drill the deeper seams that they know are there .. another indicator that OIP's potential may have been deliberatley played down to enable a ESG buy-back. Neither of these drilled the prime targets which are in PEL 6 and elsewhere in PEL 427.
ESG estimates PEL 6 targets hold around 3.5 Tcf. Even at 25% holding post-farmin .. IF the upcoming 2 wells in PEL 6 come up with the goods and with say 2 Tcf recoverable .. then OIP's share would be around 500 PJ. This is probably best-case scenario over next 3-4 months. Ascribing the lowest valuation to this 500 PJ at a 3P certification of $0.50/GJ then its worth $250m or around $1.00 per share fully diluted (you have to expect the 115m options exercisable at 30 cents up to September 2010 will be exercised). Worst case would be nothing more found and only the previous 2 wells as a guide ... say current share price up to 25 cents perhaps.
If OIP is taken over before drilling in PEL is completed then the price could be anything from 20-40 cents IMHO, if after and with success in PEL 6 .. up to 100 cents is possible .. but less than that is more likley, unless as others have speculated the re-aquisition of OIP is part of a broader plan to dress-up ESG for sale in which case the price may be less constrained.
All speculation until we hear more of course.
H
OIP Price at posting:
13.0¢ Sentiment: LT Buy Disclosure: Held
