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IMANI’s $30bn Valuation of Controversial Oil Field is Sensible. Minister of Energy’s Calculation Wrong.

a.     Minister’s statement: Questioned the valuation of the field at $30 billion @ $65 per barrel by 450 million barrels; “exposes the weaknesses in IMANI’s analyses as well as its poor understanding of petroleum economics.” Why? The 450 million boe are gross contingent resources (cannot be fully recovered) and besides, in Ghana, our average crude oil recovery rate is 25%. At this rate, the field value will be estimated at $7.3 billion assuming a price of $65 per barrel.

That’s not factually accurate!

b.     IMANI’s statement: based on Aker’s recoverable reserve estimates as provided on their website. Consistent “the biggest oil find in Africa, of 450-550 million barrels, with potential recoverable reserves of nearly one billion barrels.” At today’s Oil price of $65per barrel, that field is worth at least $30 billion (bn).

c.      Aker’s statement: earlier statement on both 4 March and 10 January 2019  as part of ongoing four well appraisal campaign states that “the existing discoveries are estimated to contain gross contingent resources (2C) of 450 – 550 million barrels of oil equivalent (mmboe) with upside of between 600 – 1,000 mmboe”.

i.    However, new press release on 26 April 2019 announcing the completion of the drilling campaign states that “Reserves, to be developed in the first phase, are estimated at 334 million barrels of oil.Discovered contingent resources, to be developed in subsequent phases, are estimated at 110-210 mmboe, resulting in a combined volume base of approximately 450–550 mmboe. These estimates exclude any additional volumes from Pecan South and Pecan South East, currently being assessed.”

See latest press release of April 26 @ https://www.akerenergy.com/news/archive/2019/aker-energy-completes-appraisal-drilling-campaign-offshore-ghana-continues-work-on-pdo

Essentially the 30bn valuation is right going by Aker’s much clearer statement of 334 million barrels of reserves on April 26.

Once again,.

1. The Minister is confusing prospective resources with contingent resources.

2. Contingent resources are already deemed to be recoverable by the working interest owner.

3. We are concerned with the evaluation of the whole resource not the resource value from the point of view of Aker so we DON’T NEED to factor in the working interest of any party. Again, the minister is completely at sea. The total contingent resources give rise to the valuation.

4. Because in Ghana we assume that once a company has committed to the Plàn Of Development they will make every investment to continue developing the field even if the price of oil falls to zero and a hurricane destroys their FPSO we don’t typically put much store on “probability of development”. Hence all the valuation estimates are always “unrisked”.

5. Assuming, as per standard practice in Ghana, that the gross contingent resources are unrisked leaves the volumetric model for valuing the resource intact at gross contingent resources which is simply the indicated volume multiplied by a reasonable oil price value. In a ballpark valuation analysis, spot price is fine.

6. IMANI’s position is sensible.


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