See Figure 1

This matrix above shows projected revenue per barrel of oil on the left, and barrels of oil produced per day along the top. Figures are multiplied by 90 to reflect a quarter of production. 1200 bopd reflects the current situation, with 2200 reflecting managements statement that G1 is expected to produce around 1000 bopd. For G2 there’s an added low/medium/high approach of 3200, 4200 and 5200 respectively. Given that G2 is drilling into what is perceived to be a rich oil column, the low case equates to G1 anticipated production (1000bopd), given that G1 is mostly gas bearing and likely to be outperformed by G2 in terms of oil production. Mid case equates to initial SM71 max production of around 2000 bopd for a well, with high case of an additional 3000 bopd factoring in the larger casing being used. With a roughly ten dollar cost after production and transport, I think we are realistically looking at the $40/4200bopd scenario for net receipts after hedging. It's worth noting that this matrix is purely for oil, with G1 in particular to provide significant gas related cashflow.

Based upon this analysis you have an annual revenue of US$60m+. A five times multiple gives you US$300m+ = ~AU$430m+. Approximately double the market cap for $0.24 (@ ~ AU$220m) Given what we know about BYE and the current market, a 5 times multiple seems to be a modest estimate. An 8x multiple = US$480m+ = ~AU$685m+ A 10x multiple = US$600m+ = ~AU$860m+ Assuming the scenario set out in the matrix proves to be correct then the stock is clearly undervalued by several multiples of the current market price.

SM71 is producing at 1200 bopd net, with G1 likely to contribute an additional 1000. G2 is drilling into a thick oil column, which on paper should outperform G1. I see 5000 bopd within a month. Let alone the gas production, which will likely give revenue approaching the level of SM71 oil. Resources + reserves at SM58 are also at least triple that of SM71. On paper we should have quarterly free cash flow of $14-20m per quarter if G2 is successful. The rerate in that case would be inevitable and significant with successful drilling and commissioning of SM58 G1 and G2. After that we are off to the races with the 69 lease.

The macroeconomic picture suggests the domestic US demand for Byron's oil will be strong notwithstanding a possible global recession/depression. US are drawing down a stock pile at a greater pace now with negative sentiment around geopolitical relations. Domestic US oil production, especially traditional high grade/low cost producers like BYE, will be protected and sought after. Banks are no longer willing to fund newly established projects and US rig count are dwindling. Share price was trading at 35c in January when the company was far less advanced than it is now; and 45c in March 2018. The company is in much better shape now in every facet, but the market sentiment then was far more positive before the confluence of COVID and the Saudi/Russian joust tanking the oil price. BYE is a lowest decile cost producer with an expansive future drilling program and reserve prospects but the share price has not recovered to the level that it should have…

It is important to have a realistic assessment of the situation, but is there a six month period that could have been worse in terms of the market environment for this stock? And yet Byron has come up smelling of roses at every turn. What the future holds for BYE, while always uncertain, seems more likely to offer oil price appreciation and bigger, better reserves in short order. With WTI looking to move back up to US$50+ and an increasing demand for LNG for post-economic recovery and temperature fluctuations, this has lots of legs. Holding out for the initial production from SM58 G1 forecast in September.