Is there biggest challenge not the rigs but getting the quantity and quality staff to carry out the task of getting oil out of the ground? They already stated this as a problem which surely isn't going to improve overnight
I posted this by mistake on WS this morning. not sure if you have seen it as I don't believe you follow that site.
I think RRL have already been taken over after playing tricks on RSR and RIG
Most of the cost cutting has come from cutting out the costs of RRDS. The funds injected are just about enough to ensure that no liabilities exist, other than those covered by the revenue from 550 bopd. Assets, are dumped to avoid further liabilities.
The Chinese have paid $42M for the oil assets of RRL. They will now act like any oil company but with no overheads.
The 12 month credit terms are not what they appear. They mean that LO will drill and then get the revenues from the oil to cover their costs as any other oil company using contractors does.
Because they don’t own RRL. Their accounts will show revenue from services and profit, this will increase their MCap. If they owned RRL (51% or more) they would have to show the revenue and loss, which would reduce their MCap as the company needs to run at a loss to avoid Corporation Tax, as it has minimum deferred tax asset.
Control comes in different forms.
As oil prices increase so does the revenue generated which allows LO to increase drilling, book more profit etc.
Where is the benefit for investors ? Normally an oil company uses funds generated to expand the business with more oil prospects, increasing the inherent value for Shareholders.
In LO’s case, they will establish themselves as an end to end service provider, trained on Trinidad, and then offer these services.
RRL's figures indicate that it takes 4 to 6 months from landing, until a new rig starts to produce oil. So plenty of time for the MCap to adjust to a more realistic and potentially attractive valuation for new investors, who can see some potential at that level.
A Company called Touchstone recently brought producing assets (1800 bopd) from Tinity for $20M, The conventional reserves are the same as RRL's who produce less than 1/3rd this.
It is quite clear to me that RRL is overvalued at today's MCap. I think .2p will start to attractive as there is then upside over the following years as production follows the profile that RRL set out with the help of independent experts.
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