i disagree with the markets valuation of adi at the moment, sure its not a producer, but if your going to devalue this share and ignore the string of reports put out by adi on kowalik, and sell this share down, then someone is buying into a potentially very undervalued share imho..
adi, although it has a well on production, is not considered a producer, and nor should it.. the second well, kowalik is producing whilst drilling at the moment, and evidenced still by locals noticing the well is flaring whilst drilling even up until yesterday.. but the actual flow rates will not be released before the well is completed and conditioned for optimum production..
i have no doubt the well is commercial.. i think a lot of others share that view..
there are a lot of investors who were very keen to get on board this share, they are waiting for the flow rates before making the move, so imho the share will re rate once the production figures are announced, and there are now 4 wells in a row for adi in texas, and two in yemen in the coming months ahead.. with indonesia coming in this month, if we get the bid, then we will also be drilling there fairly quickly. and should any of the 4 wells in texas be commercial i am certain they will be immediately be planning an extensive drilling program for the acreages..
no doubt on tiny volumes the sp will continue to fall when infact the adi has never been in a better position with a commercial find on its doorstep.. but one day in the very near future someone will figure out that the 230 acree spacings and 600 bcf is easily on the cards and indeed the wells may produce more, and its very likely that 100 acre spacings or even less is seriously on the cards..
i am holding as regardless of what happens today, tomorrow or next week.
strachan....
Adelphi offers short term speculative interest based on
imminent drilling at the high impact Wisteria prospect
in the Bonaparte Gulf Basin and appraisal drilling at its
US Gulf Coast, Sugarkane project during Q3, 2008.
Longer term, Adelphi is well positioned with two
exploration permits in Yemen, where drilling targeting
50-100 million barrel prospects is expected during
2009, while a new project in Indonesia will require
seismic data acquisition and drill evaluation.
The Sugarloaf project in Texas holds potential to deliver
a long term gas and condensate production asset.
Target valuation of $0.71 per share should support
share price appreciation as exploration drilling and
development gets underway.
Importantly for a pure exploration company, Adelphi’s
high quality technical and financial management team
is backed by an experienced Board with strong
industry credentials
The company estimates that the total play could yield 600 Bcfe of gas, so Strachan Corporate risks an additional target of 200 Bcf plus 40 mmbbls of condensate with an 18% POS and assumes that a further 22 wells would provide sufficient coverage to scope out a 3P resource, given the nature of the play.
Success at this level would be worth over $400 million to the company, whose current market capitalisation is just $42 million (currently $31.5 mill), so there is significant leverage for shareholder wealth. Once the project is proven, debt finance would be available for field development, limiting the requirement for significant new equity.
this from hartleys based on only 1200 boc/d
Valuation
Our well cost assumptions for Sugarloaf are US$10m per well (completed) with ongoing opex of US$5 per mcf produced. We assume initial flow rates of 5 mmcf/d with 1,200 boc/d per well from 20 wells drilled over three
years. This yields gross recovery of 125 bcf of gas and 30 mmbbl of condensate. This equates to 425 billion cubic feet equivalent (gross by value), which is conservative compared to the Company estimate of 600 billion cubic feet equivalent gross. We have used an 80% net revenue interest with a 10% state royalty and a 36.5% corporate tax rate. Using these assumptions, we calculate a net present value for Sugarloaf of $213m or 198cps net to Adelphi. This has been further discounted to account for technical and exploration risk; however, success at Kowalik would result in a significant reduction in risk and a re-rating of the Company.
Our exploration valuation is done on a risked basis given the resource potential, probability of success (“POS”) and approximate NPV per bbl/mcf for the different tax regimes in which Adelphi operates.
these valuations are based on the upper zone of chalks only.. and a whole lot more is known about it now and was not made available to the brokers then..
well done to those buying at the moment and adding.. i have no doubt the sellers are thinking they will get better elsewhere, and good on them for having the balls to sell this share down on tiny volumes and find better elesewhere.. but i cant see a mass exodus of holders, infact the top 20 shareholders hold 64.5 mill shares.. in August 07 it was 56 million shares between them.. that an average of 15% increase.. it indicatees steady support there imho..