Initial valuation & opinion from Gramacho on the rsn dated 22-10-2010

**Ricky ( Dross ) peters** Mon Nov 22, 2010 10:22 am

As previously announced, Caza began the completion procedure on the O.B. Ranch #1 well on November 13, 2010. The well was perforated in the Cook Mountain formation between 12,494 feet and 12,826 feet across selective intervals and fracture stimulated on November 15, 2010. Fracture fluid is still being recovered, but initial production rates on a 10/64ths choke at 6,788 pounds per square inch flowing tubing pressure are 2.65 million cubic feet of natural gas per day and 311 barrels of oil per day. Caza currently has a 43.28% working interest and an approximate 32.03% net revenue interest in the well

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Gas profit at $1.5/mscf * 2650 = $3975 gross profit
Oil profit est $50/bbl * 311 = $15550 gross profit
Total $19525/day = $7,126,625pa
Net rev interest 32% = $2,280,520
10x earnings = $22,805,200 \ 165m shares = 13.8p/share npv

Not bad, hope you get similar uplift from Bongo lads.

cheers
Diamond Don

Wow this is an extremely encouraging initial test! There is an enormous amount of excess pressure available at the wellhead which means rates could be significantly higher if they chose to open up the choke. I would expect the pipeline inlet pressure might be of the order of 1200-1400 psi, perhaps less which means they have over 5000 psi (excess energy) in hand at the wellhead.

The CGR is over 100 bbl/mm which makes this a nice, valuable rich gas condensate. The condensate yield will eventually drop once the reservoir pressure drops below its dew point but hopefully that won’t be for a while.

A good question for John M later today in Manchester will be to ask whether they will be free to open this well up to achieve its maximum deliverability or are there any regulatory or sales constraints at Bongo.

I have a relatively small holding in Caza (GKP dominates) but will be looking to top up on any future lows. Kicking myself I did not buy earlier after I saw Jon M’s presentation at Oilbarrel back in May. Our paths have crossed professionally very briefly many years ago but I saw enough then to know he is good... very, very good.

Got a long drive to Manchester today but I think it will be worth it for the double header Caza/GKP double header!

Regards and GLA

Gramacho