Internal CoS for WH-1 is actually 20%. So the Elephant discovery of 2018 boils down to two last chances, CHAR with Prospect S and MATD with Wild Horse-1.
Success case upside is greater on MATD as the prospect is 100% owned and the PSC terms are superb.
A mere 150 million barrel recoverable size find on Block IV for MATD would have an NPV10 of 1.27 billion US$ thanks to low cost of development wells, easy trucking and very good PSC terms ** (that value will be higher now due to rising oil prices)
NPV10 based on Economics run at Dec ‘17 Forward Curve prices: 2018 $63.67/bbl, 2019 $60.58, 2020 $58.56, 2021 $57.62, 2022 $57.25, 2023 $57.22, 2024+ 2% Esc
Well Name: Wild Horse-1 Block IV
Targeting 480 million barrels recoverable (mid case) 100% owned
Additional follow on prospects of 750 million barrels rec. (900 million rec. high case) derkisked in the Wild Horse area if Wild Horse-1 is a success.
Internal company estimates give 20% chance of success for Wild Horse-1
Wild Horse-2 appraisal well already permitted for, in the event of success.
Wild Horse-2 would drill into the other side of the WH lead in the event of a WH-1 discovery.
Due to analogous basin geology across the border in China there is a higher than frontier chance of success for frontier levels of potential
Notable Chinese productive basins include: Junggar Basin 10 Billion barrels recoverable, Songliao Basin 20 Billion barrels recoverable and Bohai-S. North China Basin with 40 Billion barrels recoverable.
Well defined 4-way dip structure and amplitude anomalies that are indicative of hydrocarbons. (Soft amplitude anomalies which conform to structure)
CEO Mike Buck comments that it is “A must drill well”. Royal Dutch Shell have told MATD they want to see Wild Horse-1 drilled.
Endorsed by Wood Mackenzie by their inclusion of Wild Horse-1 on their “one to watch wells in 2018” placing Petro Matad on a list alongside super majors like ENI and Repsol. The only onshore well to make it into the WoodMac list.
** PSC terms (the important bit to value any discovery with)
0% Corporation Tax
Royalty: Block IV 8%
Costs of Exploration, Development, Operations and Transport can be recovered in the success case. The implication for this is that on any success, when coming to arrange finance, this puts the company in a very strong position as it can demonstrate it can repay debt out of Gross revenue rather than profits. Yes, that is remarkably excellent, even transportation costs to sell the oil are recoverable. Pretty much WOW.......... The whole lot, explo, dev, op, transport...all recoverable.
Contractor Profit oil split: Block IV 50% to 57%
You cannot really value an oil discovery unless you also know clearly the PSC terms, then you are able to get a real good read on the NPV10. Given the present oil prices and forward curve the NPV10 value stated above is actually low and should be considerably higher now. The economics and IRR get better the bigger the find, so that is based on 150 MMBO, in the event after any discovery and appraisal that Wild Horse lives up to is Pmean of 480 MMBO recoverable, the figures are mind blowing, thats why its a "well to watch".
