Petro Matad (MATD), up 223.53% to 6.88p, said Shell, via its affiliate company, has issued an Exit Notice to the company's 100%-owned subsidiary, Central Asian Petroleum, to withdraw from the Block IV and V Production Sharing Contracts in West/Central Mongolia. Petro Matad expects to receive "highly material" compensation as a result.
O for just a glimpse of the termination provisions in that farm out agreement! MATD should release them asap.
We know the SP was 2p yesterday morning with the farm out agreement in place and progressing. Yesterday’s RNS refers to “an amount of compensation...highly material [to MATD]”.
I would interpret “an amount of compensation” to mean a simple sum of cash payable to MATD.
To add to the mix, here’s my hare-brained thoughts and speculation as to what that sum might be, and what SP to expect now.
There might be simple liquidated damages provisions, but there might be more complex provisions and formulas to determine the sum.
One basic legal principle ordinarily applicable to terminations, is that the parties should be put in the position they would have been in, had the agreement not been terminated. It is realistically impossible to expect to find a quality partner to replace Shell on similar terms, because it took a long time to find BG initially, the oil price is now lower, there has been no appreciable improvement in the world economy, and the licence term expires in July next year anyway. I also doubt Shell even bothered to try to sell before terminating.
So...the compensation perhaps should reflect pretty much all of the work and expenditure BG covenanted to undertake and pay for under the farm out agreement. In monetary terms that’s at least $28m plus $4.55m plus 2 more years of $50k a month ($1.2m). Total ca $34m. Reduce that to say $25m, to reflect the upfront payments already made, and as we’re about half way through the agreement term, but with the majority of the expenditure (eg the cost of the exploration wells) yet to be paid out. The relevance here of who owned what %age of the blocks pre-termination is difficult to determine, but say reduce the figure again (to reflect factors like the prospectivity of Shell’s %age now returned to MATD) to $14m, ie £9m, equating to 3pps. Add that to the previous 2pps, to give 5pps now. Yesterday’s events will (rightly) raise MATD’s profile, and will perhaps add another 2pps which I think is more realistic, to give 7pps.
All purely speculative garbage I know, but it’s been fun thinking about it!
It will certainly be a game changer if the exploration wells’ costs are covered by the compensation, and proceed and find something interesting.
Ojay VCB2 sorry I missed your post the other day. Laughable. The first day in 4 years of being invested in this share and on Friday I take my finger off the pulse!!! 215 posts!!!!!! Jesus!!!! I can't believe I missed all the fun on Friday avo. My last post about the bottom draw maybe finally coming good. I await and see the market reaction to Tuesday. A quick RNS clearing up loose ends on specifics would be excellent and could spring board this share into double figures. Every year so far we have made it and then drifted back down into oblivion. THE YAK COUGHS ONCE MORE!!!
Darien, the only thing I agree with you on is that the stock will open in the blue for the first 10 or more minutes of trading. Whether it rockets as it did Friday or fall cannot be confirmed at this stage. You believe it will fall, others believe it will rocket. I remain neutral and say - I am not mystic meg.
Just purely of trend, ill be in this on open and will either pull, stay or top up dependant on the reaction.
I might be wrong but Petro didn't say that. I believe Shell made that statement that their withdrawal is due to optimise their own portfolio and is not due to the technicals of Bank IV and V.
I suspect an RNS will follow to confirm that but I do think (based of the limited research I have done) that the company, MATD, is in a better financial position.
It's anyone's guess at this stage but I think the sentiment and market excitement is evidenced in the rise and I suspect there are long term investors who are more knowledgeable surrounding the significance of this news. The media articles also seem to indicate through their statements that this could be a game changer.
Of course the compensation is second to the Oil reserves and also the oil recoverable. It wont be more than £30,000,000.
There must be a certain amount of oil, fromwhat I have researched (so far) cant find any documents in black and white to confirm or speculate this. Which makes me wonder why BG/Shell entered and backed out in the first place. Petro MATD saying there are no technicalities behind the withdrawal doesnt really give us an answer.
The percentage of ownership is irrelevant...... if there is limited oil to extract and produce and provide return for the company.
what weekend media coverage. ?? the rise has been over done on hype, classiclly what the MMs do will be to first thing raise the ask on open for 10 minutes sucker some into thinking its going to rise again like friday and then bang,, doown it goes,, seen it got the T shirt.
A stock rise on legitimate news finishing over a 200% with strong buying into the close, usually (80% of the time) goes into the next market day with a rise due to gap ups and new interested investors due to overnight/weekend media coverage.
A stock rise on non-legitimate news (pump and dump) has the opposite effect.
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