The following multiples are sourced from Independent Expert...

The following multiples are sourced from Independent Expert Reports in assessing the attractiveness of a takeover.

Applying them here shows the potential for an acquirer to pay $0.80 - $1.50 depending whether a gas/oil multiple is used.

From 12 January 2017 Independent Expert Report

• Shows SXY with 83.40mmboe 2P reserves (ex Atlas)
• Project Atlas has 201PJ P50, Ian mentioned 2/3 could be booked as 2P
• 201PJ = 33mmboe x 2/3 = 22mmboe 2P
• Total 2P reserves = 105 mmboe

Using the average multiple of 7.8 = $820M (minority)
Add a 30% control premium = $1065M
plus the $80M cash = $1145EV  / 1440
= $0.80 share price


From 2 May 2017 Independent Expert Report

• Shows SXY with 489 PJ in 2P reserves (ex Atlas)
• Project Atlas has 201PJ P50, Ian mentioned 2/3 could be booked as 2P
• 201PJ = x 2/3 = 134 PJ in additional 2P
• Total 2P reserves = 623 PJ

Using the average multiple of 3.33 = $2,074M (control)
plus the $80M cash = $2,154EV  / 1440
= $1.50 share price

Stay calm, and wealth may well be transferred from the inpatient to the patient.

Both of those Independent Expert Reports show AWE is now trading on a lower multiple than AWE. Even one of the analysts asked about corporate costs in the conference today. Corporate cost savings are quick win synergies.

Regardless of the well flow rates (which were mentioned to be ahead of  P50 expectations), the booked reserves give me comfort that SXY is where my money will stay.

The onus is now on management to deliver returns or risk being gobbled by an acquirer, because once Project Atlas gets booked as 2P reserves it makes this an even more attractive takeover proposition.

Stay calm and watch this space