Casino Fatala
for the gambler:
I think an appropriate anaolgy would be playing the 3rds at the roulette table. What makes this Fatala table so special is the payout for the same odds. The Fatala payoff for hitting one of: 1-12, 13-24, or 25-36 will yield the 35:1 vegas odds for hitting a single number, instead of the normal 3rds vegas payout of 2:1. So Fatala gives you 35:1 cash on the NSAI 31% success probability, when vegas would give you 2:1.
Of course we have to cut that in half based on 50% or less working interest. So with a +650 to 1,000 MBOE discovery its reasonable to see sp rocket north of $20/sh even after dilution. From there they could get an extension to drill another exploratory well if ROG isnt getting immediate action elswhere. More likely there is a buyout/merger with success.
If Fatala comes in short of commercial success its game over at the Fatala Casino :(
for the accountant:
Recent similar asset sales have gone for about $2/BOE, so with 650MBOE (mean) thats a valuation $1.3B. HDYN interest would be $650M. Share price would be $650M divided by 40M sh/out (est. after dilution) which equals $16.25/share. So any less dilution or any more barrels takes it north of $20 and vice versa.
*years ago on NYSE pre reverse split, this stock traded north of a $1B valuation with no wells on drill schedule and no partner. Past performance is not an indication of future results, but hype and a run on shares COULD take it much higher than my fundamental calculation above. Improvement in oil price/overall market outlook and favorable PSC terms could make the going rate higher than $2/barrel.
JMHO
