GKP Dalesman 23 Nov 'RNS lower discoveries'

DALESMAN 23 nov 2009 news release analysis

"Nothing has changed I hear shouted from the board - wrong!As ghharrison pointed out in one of the few lucid posts of the day, todays RNS under writes the SP, as the additions gives you more bucks for your bang!Given the huge find in the Kurre Chine at 50+ API the increased gas drive to flush out the low GOR Jurrasic oil, the increased recovery expectations from the Kurre Chine itself (See the FD note) and the increased OIP, results in each £1 spent at todays prices giving a heck of a lot more value (oil) than it bought yesterday.

Ill say it again : TODAYS RNS ADDED VALUE. I have published my own NAV which no one should take as gospel; it is based on my own research and experience and I believe it is not far out from fair value and is if anything, probably too conservative. I am using Fox Davies figs - who increased OIP today to 4.4billion Oil in place. I personally think that 33% recoverability is reasonable, given the highly fractured natures of the Jurassic reservoirs (14 darcies was mentioned by GKP) and given electric submersible pumps and the gas drive from the Triassic I think that 33% is achievable. To balance this I am leaving the 40% recoverable figures for the Triassic. (FD gives 50%)The result is that my Nav has a £1.965 valuation at $60 oil.

Given the high grade, high API Triassic find with huge flow rates, perhaps $70 oil is more in line with market forces and this results in a NAV of £2.29. Whatever value you use (and I prefer to look at the base case) there is now approximately 100% upside to the GKP share price.I expect the NAV will need further tweaking as 1) the OIP figs go up, 2) backin rights are revealed, 3) political factors are resolved, 4) production begins, 5) a new drill starts to turn at Akri Bejeel, 6) workover rig starts its testing, 7) new rig is announced for Sheik Adi and so on.

For whatever reason the share not only got cheeper in real SP terms but that money now buys you more. When insanity goes away and shares from small PIs have been hovered up by the instos, some, perhaps many well look back on today and ask why the hell did I sell - why didn't I buy - No other share on fundamental terms is this cheep, offers so much and is liquid. Go figure. I end the day with more share than I started with - even if I bought them at a higher price than that at the close. This will matter not one jot when the true value of the find is realised. Just one more thought- my NAV does not have any allowance for Algeria built in so add on your own figure for that asset.

Long - not to say longer! And still holding strong.

NAV here:http://img134.imageshack.us/img134/6825/picture3mz.png

Please DYOR

Cheers Dalesman"