Implied value of CVR:
Resource Volume CVR Value US$
6.2 TCFe 0
7.2 TCFe 6.05
8.2 TCFe 12.10
9.2 TCFe 18.15
10.2 TCFe GLJ 2C estimate 24.20
11.2 TCFe 30.25
12.2 TCFe 36.30
12.4 TCFe GLJ 3C estimate 37.51
Here is what IOC’s independent resources certifier said: “GLJ Petroleum Consultants Ltd ("GLJ", an independent qualified reserves evaluator, prepared an independent evaluation of Contingent Resources for the Elk-Antelope Field as at December 31, 2015 which estimated the gross unrisked Contingent Resources for the Elk-Antelope field# of 7.7 Tcfe 1C, 10.2 Tcfe 2C and 12.4 Tcfe 3C.”
For what it is worth, which I think is not much, Hession said our high case has become our mid-case. So he has told us that if the fault is further west, as they think it is, then the GLJ 3C number becomes the 2C number. So 2C would be 12.4 TCFe.
So what might we do with this information?
We make a few assumptions:
1. Assume the OSH deal to buy IOC is approved.
2. Assume OSH puts up a tradable CVR shortly after the deal is approved.
3. Assume the drilling of Antelope-7 goes ahead prior to certification in September 2016 as they have told us it will.
What will the price of the CVR be when it is approved for trading? I would think it would be fairly low. Today’s implied value, at the moment, is (41.63 -40.25) or $1.38/sh.
You have to decide for yourself what you think the certified resource number will be after drilling Antelope-7. If we find all of the high porosity rock like we had in Antelope-5 the resource number should be higher. If the Antelope-7 is too far to the west it could be a dry hole and the resource number would be back to where it is now... GLJ says 10.2 TCFe. If Antelope-7 is successful we should see the CVR increase in value. If Antelope-7 is a dry hole the CVR would probably decline in value.
Let’s say the CVR trades a little higher than it is now after the deal is approved. How about $6.05/sh or assuming 1 TCFe above the 6.2 TCFe cut off. Now you decide what you think the certified resource number will be after drilling Antelope-7. Will it be 7.2 TCFe or will it be something higher?
If you could buy it at $6.05/sh (7.2 TCFe) when it begins trading and we eventually find our the certified number is much higher than 7.2 TCFe you can see your profit margin depending on the certification out come.
I assume the CVR’s will be in your account when it begins trading. You will have to decide if you are a holder, a buyer or a seller.
I offer no advice!
Good luck