Northern Petroleum

Soulsauce, here is something to think about.

LUKoil announced that it has agreed to sell its 10% interest in the Azeri-Chirag-Gunashli (ACG) project in the Azerbaijani offshore to a majorJapanese oil company for an amount in excess of $1.25 bln.

Pursuant to theterms of existing agreements, this stake will be offered to the State OilCompany of the Azerbaijan Republic (SOCAR) and the current participants inthe ACG consortium before completion of the deal.Should it succeed, this transaction would represent a true step towardsfulfillment of LUKoil's strategic restructuring program announced in April 2002.The company is considering the possibility of reducing its interest in projects inwhich it is not an operator while investing capital in highly efficient core-assetacquisitions in Russia, including privatizations.

The price of LUKoil's interest in ACG exceeds our valuation and implies $2.45per barrel of estimated reserves, or 2.5 times more than LUKoil's valuation ofproved reserves. The company might use these proceeds to invest inexploration of the Timan-Pechora basin or Caspian offshore. While LUKoil hasnot yet declared its interest in the privatization of Slavneft, obviously thecompany will consider such an opportunity.The sale of its stake in ACG for this amount will boost LUKoil's value by $0.93per share. We therefore upgrade LUKoil from ACCUMULATE to BUY andraise our target price to $21.4 per share
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Here is the link and the passage above is on page 6.



So Lukoil get "$2.45per barrel of estimated reserves" where they are not an operator. And if we get $1 per barrel for our "estimated reserves" then we get $18m. Remember Lukoil are operators of our acreage.

Also

1. Lukoil have already bought out minority foreign stakes for reasonable value.

2. Timan Pechora is their main area of interest.

3. Don't forget all of the recent agreements signed by Lukoil and Nenets.

4. Our arbitration forces the issue. (NOP would not have gone to arb if they did not think they had a case.

5. Big companies like buying out smaller company holdings where they are operator. (Think of Ramco buying out NOP's share of Seven Heads among others).

7. The oil price is circa $28 a barrel, fair value of NOP's assets in Russia was $18m, estimated when oil was $18 a barrel.

8. It costs Lukoil $3 a barrel (on average) to find and extract oil.

9. The wells are in place to produce 15,000 barrels a day. And the pipeline was almost complete when stopped. It probably would only take a couple of months to complete. (And they may be working on it now for all we know. It is after all the right time of the year for working on the Timan tundra).

Ever the optimist.

Skidaddle