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Exclusive: Hayden Locke, CEO Emmerson plc, a low cost high margin potash investment | Watch Now

Exclusive: Hayden Locke, CEO Emmerson plc, a low cost high margin potash investment
Richard Slape, Oil consultant - Avoiding Losers and Picking Winners, his personal strategy


Member Info for Tiburn


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Member Since: Sun, 22nd Oct 2017

Number of Share Chat Posts (all time): 1,122
Number of Share Chat Posts (last 30 days): 155

Last Posted: Wed 17:58


Post Distribution over the last 30 days




Wed 17:58

If a sovereign Government whose primary revenue is tourism is prepared to advocate drilling for oil in their pristine waters and risk all, what does that tell you about the probability of oil being there following all evaluations? Can you imagine the Due diligence scale completed as they are risking all? Note the environmental consultant but tis is going ahead.

It then follows that a Major would be interested with such a high CoS evaluated by many players with different drivers to reach a conclusion.

There is nothing else to do except drill - and all players know it

Deals take time, but the likelihood of a deal is now without much doubt - I don't caveat now.
Wed 17:42

Apologies for leading with the worst case scenario chap, your right

It is of course scenario 3, AAOG expectation case that should have been number 1 :)

All good - just preamble rambles - CPR soon
Wed 08:38

Sardy - yep just scenarios, but reasonable perhaps knowing what we have been told, as you say many permutations of this mix

There are multiple aspects, with Vanji found, percentage share increase of field, Major financial partnering towards sale, other acreage or assets, finding much more Djeno oil than expected etc etc

The key focus I retain above all else:

The 44m Mengo/R2 column and 103 has all the characteristics of other producing wells according to SNPC and they believe it should flow and be commercial - all development is then possible from this and will be known in just a few weeks.

If the 12m of Djeno flows and is commercial then we have a game changer
Wed 07:53

Excellent interview

They can do a lot with their remaining money, near surface targets, RC drilling is cheap.

News rich period has started now the JV is done.

market hasn't got the transition yet.
Wed 07:28

Scenario 1 - Absolute Worst Case

• Well 103 doesn't flow/ not commercial after stimulation - plug and abandon
• SNPC doesn't pay debts or fund 104 share - no production revenue to retain from 103
• No funds for 104 except by massive raise and death spiral debt facility
• 104 then drilled eventually after dilution and debt, no further oil found and 12m doesn’t flow
• Licence formal confirmation to 2040 doesn't materialise
• No new assets as no capital to invest
• Government re-nationalises Tilapia field
• Game over and delist

Scenario 2 – Reasonable or Central Case

• Well 103 flows and is commercial, but only 800 bopd assumed
• SNPC doesn't pay debts or fund 104 share
• 100% production revenue retained from 103 = $1 Million a month after tax at $65 Brent
• 104 cost at $8 million assumed fully funded by AAOG – drill in Feb 2020 by revenue from production/forward revenue lending facility
• 104 flows from Djeno 12m - to 2,000 bopd– no further Djeno oil found or in Vanji
• Licence formal confirmation to 2040
• Slower company growth trajectory, 2,800 bopd total still gives $3 million a month retained revenue after tax to pay for forward drill programme.
• Drill programme in effect and cycle up to full field production, compounded growth
• New assets
• Buyout or dividends paid – stable SP

Scenario 3 – AAOG Expectation Case

• Well 103 flows and is commercial to 1500 bopd as SNPC experts informed AAOG
• SNPC pays 103 debts in staged payments each month
• Assumed that Forward drill programme for 104 and six wells planned paid for by retained revenue from 103 into production (Not a confirmed company view, but a potential)
• 100% prod revenue retained from 103 = $1.8 Million a month after tax at $65 Brent
• 104 cost is $8 million assumed fully funded by AAOG – drill around Aug 2019 by revenue from production/forward revenue lending facility
• 104 flows from Djeno 12m column – to 2,000 bopd assumed
• Further Djeno oil found as Geos fully expect - Geological model is proving very accurate – total 5,000 from Djeno assumed as per adjacent fields in production
• Vanji is a complete unknown and is not factored
• Licence formal confirmation to 2040
• Faster company growth trajectory, 6,500 bopd total gives $7.7 million a month 100% retained revenue after tax to pay for forward drill programme, $4.3 million p/m at 56% retained.
• Faster Drill programme in effect and cycle up to full field production, compounded growth
• New assets come on line – early production expected and rapid development
• Buyout or dividends paid – stable much higher market cap and SP in 2019/2020.
Tue 21:33

Yep - not full drill out of all 20 targets of course, I didn't expect them to do much more than MMI sampling or 3DIP for a while. I was just intrigued by those statements in the RNS with Paterson East highlighted and emphasised before BH and Scallywag.

No news on DDH1 partnering continuation yet - knowing GH something is being done here and it could be huge.

SB has been silent recently, even after Newcrest RNS - he could have got offered another few £million worth plus others invited

Lots of options opening up now to GH as Newcrest gain momentum, they are a real and active JV partner, no mothballing Havieron for ten years as a strategic asset.

I fully expect GH left field and brilliant moves.
Tue 19:16

"Leverage exploration insights gained at Havieron to prioritise and accelerate exploration at key targets across Greatland's Paterson licences"

" Greatland has identified multiple targets within its licences with a similar geophysical signature to Havieron and is working on prioritising those targets for 2019"

GGP have leaned a lot from Havieron and Newcrest evaluation data they must have shared that could apply to Paterson East as similar geology - they could prioritise these 20 targets much faster than expected and with more resources, as Scally and BH at surface, much cheaper RC drilling campaign expected.
Tue 18:37

Barking

fair enough

All I'm doing is quoting the CEO on timeframes he stated and taking him at his word, some may think differently of course.

As to if 103 flows or 104 to 5000 bpd - you may think this is still at risk and that's fine, but I do not based on evidence presented to date - neither one of us knows for sure of course, but I think the ayes have it.
Tue 17:04

"We are determined to build Greatland into a large and successful business delivering significant returns to our shareholders and we look forward to providing updates on both Newcrest's progress at Havieron and Greatland's exploration efforts in the Paterson and at our other exciting projects."

- Telfer closes in 3 years max - Its inconceivable Newcrest will take 6 years to prove up Havieron and into production by only investing the minimal specified amounts in the JV agreement

- GGP is fully underpinned by Newcrest for all asset development, route to sale established
- No time wasted on courting the deal, pure exploration and initial drilling and evaluation - new recruit clear intention.
- Havieron was nine drills, even DDH1 drillers paid a proportion of costs and gained GGP shares - they could continue this for BH, Paterson East etc going forward.

That 5% extra ownership sale offered to Newcrest once fully proven at full market rate is a great strategic rider by GH in the JV deal - this could materialise around the time GGP are in a position to fully drill the Paterson East 20 targets.

Once Havieron is a mine, production revenues or full sale of Havieron asset at circa $1 Billion scale expected.

GGP Share buy back and dividends in due course - GH would have supreme pleasure in making this happen for his LTH shareholders.

Stay for 3 years and see.
Tue 15:11

Barking crazy

Your right I still do believe

In the company and its assets that is - don't you?

The timing is irrelevant to me - this is oil exploration

If April for 103 into production, great, if not, so be it and the same goes for 104

Fundamentals are all I care about in this share, and my point was - these are very good indeed.
Tue 07:44

- 1500 bpd expected in April with 103 for 44m oil column into production, all flow indicators similar to existing wells in production now according to SNPC - tried and tested approach
- Djeno into production Aug expected to 5,000 bpd possible from the 12m of oil column found, let alone further potential lower down - if 100m found and Vanji?
- Full drill programme in development – production revenue funded
- Pipeline built and Major offtake for sales via export terminal to US East coast
- New assets and/or licence awarded in Congo, SNPC payback or retained revenue
- Risk reduced compounded company growth is to be expected

Every single target has been reached, and additional oil targets found.

DS recent comments at Turner Pope presentation, his best performance yet, he had a rich mans mature confidence not seen previously in other interviews or presentations.

“ Net free cash flow of a $1million a month…serious cashflow that’s making us as a Company…to make that kind of cashflow gives us the independence and the freedom now to look at developing this field properly, to look at other assets and take the company forward”

“Critically we have gone into a field the value of which is absolutely massive.. New Age adjacent has booked over 1.4 Billion barrels of reserves from their part of the Djeno and we are sitting right next to them….its a phenomenal result”

Still no negatives I can see.
Mon 10:03

The key risks are minimised now oil is found, but nothing is solid yet on reserves evaluation or production, AAOG has drag anchors holding it back.

There are outstanding issues to be ratified before the company can move forward, associated with doing business in Africa and the technical production/drill programme ratification.

1 - TIA

The potential negatives are those associated with African business, Ministry licence letter confirmation delays and SNPC payment schedule for money owed and forward drill programme contribution – all out of AAOG control, In the meantime:

- Licence statement of intent has been made
- First SNPC payment made, schedule of payments/share % discussed with JB

It may seem slow to date but this is rapid fast track activity in local terms, delays are the norm and patience is required.

What should not be applied are Western Govt expedited business timeframe expectations, which may raise doubts if not achieved – that appears to be the case for the market now and is one of the SP drag anchors.

1.1 - Licence and CPR

It is very much in Congo Govt interest to be supportive of small players like AAOG in developing the marginal areas or smaller licences that Majors cant be bothered with. From 50 bopd to potentially 6,500 if Djeno is in production in one year is enterprise to be promoted and rewarded.

This support will materialise in the licence letter as per their statement of intent, until gained however the CPR for 2040 reserve calcs cant be fully validated, only assumptions can be made.

JB will be lobbying for the letter to be issued as a priority, the CPR calcs to 2040 are probably complete but CPR may not be issued until licence gained for full effect, otherwise it could be just another brokers note perception by the market without surety in ownership.

1.2 – SNPC and Cashflow

Once licence issued impetus grows and SNPC pressure to commit fully to a programme of drill funding agreement, payment of money to date should be by retained 100% production or instalments, either way, high cashflow this first critical year once 103 is in production, plus leveraging reserve-based lending.

2 – Technical Production and Drill funding

Although we are given surety that 103 is just to be fracked and into production to 1500 bopd, its not 100% until completed and flow rates stabilised, until then this is a drag anchor on the SP.

104 funding will be known once 103 flows and SNPC funding established, perceived risk of placing is a further drag anchor however.

Topside infrastructure funding unknown, but sufficient for 103 production.

Assumed production will pay for further drills, but tbc.

These aspects are pending ratification, but very positive outcomes are to be expected.
Fri 09:11

Nothing has changed since the licence ratification RNS and subsequent AG etc comments

It was said that the politicos comments was normalising the issue, getting public aware a drill is coming but environmental safeguards are prominent. The BG believe this drill will occur and are backing it.

Its all over the Bahama press, discussions are in play and the clock is ticking on the 2 year programme

Most cogent to have any chance of a drill this year pre Hurricane season a deal is needed within weeks

The RNS was almost a joint BG and BPC release, so they must jointly think this timeline is viable, all constraints in law, tenure and approvals are removed - the game is very much still on - this placing is like lint on your suit - just ignore.

"The Company's obligation during this second exploration period is to safely implement an environmentally responsible exploratory well. At the conclusion of this period, based on the results of the initial exploration well and in accordance with the existing terms of the Licences and the pertaining regulations, the Company will have the option to apply for a production lease over all or part of the licence area, and / or extend the licences into a third exploration period and / or apply for an appraisal extension.

The notification received from the Government also stipulates that the Government and BPC must in the coming months agree a forward work programme for 2019 and 2020 and a reconciliation of licence fees already paid, including during the period of disruption, with any future licence fees due up to the end of 2020. The forward programme will include the process for Environmental Authorisation, in accordance with the relevant Act and Regulations, based upon an application already submitted by the Company in April 2018. The Government has advised of the engagement of Black & Veatch, a leading petroleum industry consultant, to assist with this process. Black & Veatch previously advised the Government in the process for the Company's Environmental Impact Assessment (EIA), filed in 2012.

At the same time, along with its advisers, the Company continues the process to secure a farm-in partner for the initial exploration well - discussions are continuing with multiple third parties."
Fri 08:23

Thats a ridiculous over reaction to what should be the last placing pre Major on board

Potter has to get this done this year and i think a deal very soon, they are just getting operating capital pre deal so as not to dilute the rerate

good move really and in the grand scheme on multi billion boo this is irrelevant

If you don't believe in the grand scheme then no point remaining in any case
14 Mar '19

Average cost for diamond drilling per meter as per this recent example was Can $75 or US$ 56 p/m.

https://www.rns-pdf.londonstockexchange.com/rns/4330C_1-2018-9-30.pdf

The $5 Million stage 1 spend for Havieron is just the minimum, NC will spend what they need to towards proving up rapidly and with 3 years before Telfer closes or is mothballed, this programme may advance.

But assuming that US$56 p/m average cost = 90,000m of drilling

Even if costs are 4 times this and more like $200 p/m = 25,000m

That bandwidth of drilling investment is going to go a long way towards gaining feasibility and decision to mine. NC will adjust what they spend after the first tranche of drilling in April, depends how much infill drilling they need towards JORC.

This JV is also an Investment in GH and his team by Newcrest.

NC has rights of first refusal in other assets as they are evaluated, as GH develops other prospects they should also fall under this agreement.

GGP could be in essence acting as NC exploration Division in Paterson/WA, but not subject to a Majors board decisions affecting GGP direction – GH will make the right decisions as he has to date and be trusted to do so as his business model has been proven to work.

Equally, the Newcrest JV could influence the DDH1 agreement to expand with GGP, not a hard sell to DDH1 board to go all in here for drilling out BH, Scallywag and Paterson East.
13 Mar '19

Cheers Paddy - good call.

Exciting times

Now what must Rio be thinking? and as for Newmont....
13 Mar '19

"Additionally, during the farm-in period, Newcrest will have a first right of refusal over the remainder of Greatland's Paterson project (Black Hills, Paterson Range East and remaining areas of Havieron licence"

remaining areas (plural) of Havieron licence

That should be Scallywag only in the Havieron licence zone

So to mention "Areas", is there another zone being evaluated within Havieron licence?
12 Mar '19

A superb coup, both GGP and Newcrest should be very content with this deal.

https://thewest.com.au/business/mining/newcrest-quashes-closure-talk-for-underperforming-telfer-gold-mine-ng-b88747000z

“The company announced it would invest $93 million in a new cutback at the West Dome open pit, extending the mine’s life from 2019 to 2023”

Telfer was due for wind down and closure by 2023 – one of the biggest gold mines in the world infrastructure, logistics and team just 45km away, with a well established route to market shipping out of Port Hedland and end buyer of the gold in China.

The drive to get Havieron into production should ideally be twinned with Telfer closure in 3 years.
Any delay between closing Telfer and moving Havieron into production means key staff may leave, sales agreements lapse etc.

The Havieron deal has just written long term contracts for NC key staff, increased morale and retention.

GGP will have 30% retained ownership revenue from gold sales at full market value as rapidly as Newcrest care to develop Havieron.

In the intervening 3 year period, GGP carry in their case study perfect business model on identification and development of their assets, with that total derisking production revenue inbound in due course.

Snapshot potential revenue calc:

Assume 500k oz per year extracted at $1,300 an oz = $650m gross revenue
30% retained = $215m p.a
Tax, extraction costs at high total 75% = $54m net profit per year for GGP

GH may hive off Havieron mine into a separate company with a mining engineer CEO, but with the parent company still being GGP and its board and revenue gained going into proving assets.

GGP Inc could be a substantial holding company with both production revenue and focused exploration and development at their typical rapid and innovative pace.

As BH and Paterson East etc hopefully proven up, the holding company gains producing assets in what could be a carbon copy deal with NC.

GGP could be in essence acting as NC exploration Division in W Australia, but not subject to a Majors board decisions affecting their growth or activity – GH will make the right decisions as he has to date and be trusted to do so as his business model has been categorically proven to work.
11 Mar '19

When these obvious derampers with low post numbers appear, showing a cursory understanding of the company current position, assuming past slow moving performance continues and nothings changed .......

Its time to load up
11 Mar '19

What makes the most sense is normally the truth

We sometimes look for elaborate byzantine plots to understand circumstances as in BPC, all smoke and mirrors

To me this is now simple

- BG is fully onboard finally and wants to drill for oil - that's a fundamental breakthrough
- They will placate the Environmental crowd and are engaging early with appointment of the Env consultant.
- Clear mandate given to BPC with licence extension and programme of works and clear accountability for both sides - those terms could have been written by MQ they are so good, with clear path to drill
-The resource being there isn't in question really -independently verified - the only thing to do now is drill
- In the RNS it comes across as a given that a Major will join BPC
- Politicians positioning behind the announcement, normalising

Patience required a bit longer, we have come so far into the light


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