Welcome back Kinematik.


As requested, I offer the following comments.

As the CEO of TAQA said there is significant upside on the Atrush block, and they are looking for 100% control of the asset in due course. I'm sure other potential bidders for SNM's 26.8% interest may also be spoiling for a bidding war if that happens. So, my view is that the $600 million price paid by TAQA was not the full price as the deal has to be accretive to TAQA's bottom line.

It is estimated that the Atrush field has 500 mmbbl to 1 BBL or more of oil in ground. It is totally derisked as SNM has declared it to Kurdistan Regional Govt. (KRG) as a commercial discovery. For comparison purposes, the neighbouring GKP's Shaikan Block has an mean estimate of 4.2 billion barrels in place. According to SNM, Atrush and Shaikan share the same geology.

Just taking the lower conservative 500 mmbl number, I see SNM's per share value at $0.46; not counting cash and the other valuable Kurdistan oil properties. I expect the Atrush field will be 1 billion barrels or more. The Atrush-3 results and the Oil Report may provide the answer.

Calculating the NAV

To calculate the net asset value, I have taken the estimated oil in place (OIP), the low estimate for say 500 mmbbl, and multiplied that by the recovery factor * (35%), then by the diluted working interest (26.8%), and finally multiplied by the estimated profit per barrel ** ($8.00). This places its value at $375.2 million. Taking its value of $375.2 million, I then divide by the number of shares 811 million. This values Atrush currently at $0.46  a share. You do the math., if the OIP is over 1 billion barrels.
Note:* recovery factory and **profit per barrel are based on Shaikan Block's data.

As for stock holdings, KRG owns 150 million shares, Lundin Pet. owns 50 million and Lundins' other family trusts (Lorito & Zebra) own 160 million more. The Lundins will not let go of SNM until it is north of $1.25. Easy double and possibly 3 bagger in 6 months. In Nov. 2012, Scotia Capital had upped SNM's share target from $0.70 to $0.75. Morningstar has pegged an the stock's intrinsic value at $0.48 per share.  

Strong speculative buy.