One questions that is often raised is whether BRK sell their puds for significant multiples? Dan's response is below:
100% correct about BRK selling land and future production as PUD's ( Proven Undeveloped Reserves) for a significant multiple (~ 10X ) but they won't necessarily sell all their reserves. The BRK mantra is to maximise shareholder returns based on what is best at the time and with the price of oil, NGL's and gas being high right now and looking to stay at these levels or possibly even go higher, producing and selling production is getting more attractive as the payback period for drilling costs keeps decreasing .
The flexibility of their business plan will allow them to effectively have their cake and eat it. What that means is they can take advantage of the fact that they have two reserve zones, the Sycamore which the Jewell is targeting, and the Woodford, which lays immediately below the Sycamore. Drilling and producing from the Jewell well will not only prove the reserves in the Sycamore, but also the Woodford.
This means that they can choose to develop the Sycamore by drilling another well or two in that formation, and fund that bu selling the PUD reserves in the Woodford to a major like CLR ( Continental Resources) where the cash generated by that sale will be greater than the costs of drilling the extra Sycamore producers, and have cash left over for purchasing more tier 1 acreage in the area and repeat the process.
Thus BRK will be receiving material cash from production and large cash injections at intervals as they sell the PUD's.... an incredibly robust business model.
As to how much will the SP change?.. how long is a piece of string? The current asset base once drilled and reserves proven at prevailing commodity prices should value them ~10 cents per share on a non diluted share base ( combing the reserves in SWISH, STACK wells and the Bullard DSU). But that doesn't mean the SP will reflect this.
This is a company building process where BRK now have operated DSU's, all of which have Sycamore and Woodford reserve zones. When they drill the initial well on each, which should be done within the next 12 months, they will have the capacity / optionality to monetize those assets via their production/ PUD sale plan to acquire enough acreage (8000-12000) acres to apply for at least 10-15 DSU's of similar potential the the current 3.
That is when the true potential of BRK will come to the fore and what can the SP be then? Who k
... keep reading on reddit ➡First off, I am not a mining engineer but I've read became interested in investing in the mining sector a while back and read a lot.
I was watching a webcast by someone from Alamos Gold and he mentioned that the difference between the above classifications pretty much just boils down to drill hole separation. I think he then threw out the following numbers [in meters]: 10 (proven), 15 (probable), 25 (measured), 50 (indicated), and 75 (inferred). So now, some questions:
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Is drill separation the only difference between reserves and resource classification?
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Are these numbers associated with the different classifications standard across the gold mining sector?
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Would a uranium mining company, for example, use the same drill hole separations for classification or do different commodities use different numbers for drill hole separation to define their classifications?
TY
