A7

[Getitrt2]

Well the question is, is it worth a $400 milllion to a little over a billion to delay a year or 9 months. Is that worth the gamble? Will they have the revenues to sustain through that period? Lot of unknowns.

The gamble is the present value of the newly-found 2T minus the present value of a producing LPG plant evalulated for the one year delay minus the present value of the corresponding reduction in the balancing certification whenever that certification is called for by IOC.  I haven't done the math but  there would likely have to be some extraordinary combination of interest rates necessary to provide an economic justification for drilling A7.

A far more rational well location drilled to assure gas would be available to justify 10 MTPA would be Antelope South or the eastern flank of Raptor.  Either would be carried. Either could potentially provide 3 TCF.  All they need is a test well.  And likely both sites have been cleared.

An additional 2 Tcfe would provide huge "economic justification" for drilling A7.  Neither Antelope South nor Raptor would provide the additional certification being discussed per the SPA.  Raptor would not be carried, and I feel sure neither site has been cleared.

You may have missed my point.  The value of bonus for finding 2 additional Ts by drilling A7 is offset by delaying the base project by a year.  That delay has a significant economic cost when companies are looking for 15% ROI and use that number to discount future cash flow.  Further, those 2Ts would ultimately have been paid for, albeit at a lower effective cost due to the discounting on the follow-up certification.

What gets me is this.  For years I've heard what is really needed to determine reservoir volume is drawdown pressure tests. Now that we have them they aren't valid?  What good are pressure drawdown tests if not to measure total reservoir volume?  If E/A was a tight and possibly compartmentalized reservoir than maybe gas in out pockets might not show and the pressure tests would not be accurate.  But E/A has very high permeability thus should provide highly accurate data.

After all the calcs are done I bet the economics don't work.

Either Antelope South or the eastern end of Raptor (which appears to be in PRL15) would classify as the discovery well.   I think we've all just assumed the discovery well would be Antelope South.

We do not know that the "base project" would be delayed by a year, and I do not think it would.  I think an additional billion dollars cash in less than a year would be hugely positive for IOC and its future and its stock.  I think there are significant questions left about the fault that could affect the certification, and would be interested in Pet's comments on your comments about the need for A7.  I'll go with the judgment of IOC's experts on all this.

The PRL 15 discovery well has been specifically and consistently identified as Antelope South by management, and I have heard no one else suggest it should be anything else.