What's It All Mean??, page-12

Mandurah wrote"let's ASSUME then that 77H does in fact flow 4mmscfd. I will also assume that there are no declines
in flow over the 2 years it will take to extract 3bcfg. 4mmscfgd = $32K revenue per day {allow 330 days
production, 35 shut down for maintenance etc} Annual Gross Revenue = $10.5 million p/a. 2 years
gross revenue = $21 million. Oilex share 45% = 9.5 million over 2 years. 9.5 million minus 5.4 million {Oilex's
share of well} minus say $2.1 million admin, salaries etc leaves 2 million net revenue over 2 years LESS
40% corporate tax leaves 1.2 million NET profit over 2 years on an $8 million investment. ROI = 15%.
Commercial at this rate JUST.

That's probably why I think that 4mmscfgd is the MINIMUM for it to be commercial.

Please clarify
1 I presume that your 4mmscfd of gas is actually an equivalent figure comprising 1.6mmof gas($12800) and194 condensate($19400) This is based on the 120 oil per mm gas that they have announced
2 At this rate I dont consider it commercial just .Work it out on marginal cost /marginal revenue you have a very different picture.Those salaries are more or less overheads.When the second well comes on they will be half that amount per well ,with the 3rd one third that amount....etc Bit simplistic but gives a much more accurate picture And that is before factoring in lower well costs and longer fracs on future wells
3 If you absolutely insist on aiming at an accountants view with no consideration of future wells sharing the overheads then you must get rid of the tax.There is enough of a tax loss built up to make it irrelevant
4 Whether this is an oil well or gas well is really semantics. Technically oil What counts is the $ and this says oil too.
5 So assuming 1.6 mm gas and 194 oil what are the implications?
5.1 With the money much more tilted to oil do we stick to to our original plan for next 4 wells.We are on the contact line for oil/gas now .Do we focus on moving west with the oil.Which will decline less oil or gas?Which is the more strategic way to go?
5.2Worst case scenario is share price of about current price on gas only flow of 1.6mm.Oppies will still convert and we can pop in 3 more wells.Year 2 those 4 wells finance 4 more.Year 3 if first well has expired
we get enough to finance 7 wells......
5.3 Do you think 2 years is a realistic well life if we start @4mm gas EQUIVALENT.Even at much lower rates we will have spent most the money already so keep pumping until its miniscule
6 My last question You talk about 790 barrells of oil in the first week. I Asked before but where do you get this figure from and are you not confusing it with the extra oil produced from our small wells in the Cambay field?
Off to earn a $ the hard way now.When i do that next year lets hope its purely for fun
GLAH