IG. I posted similarly to you on iii last week - and agree with everything you say bar the timetable. And you may be right there as well, but I think the drive here will be the readiness of the behind scenes commercial discussions.
There is no doubt in my mind that we are now watching a well developed plan being played out - and this has probably been kicking around for at least 18 months. Hindsight is a wonderful thing but the CPR was the key. It was requested not for us but for one or more potential partners. FRR didn't ask for shallow field resource data because our friends know, or are in the process of knowing, everything about the shallow. And the CPR was only ever about the deep because that is where the costs go through the FRR roof. In my view the MK CPR prospective resource estimates are therefore likely to seriously understate the MK reserves - because they ONLY talk about the deep fields (as Bugsy was the first to spot).
And you quite rightly talk about the MOU. An MOU is not some casual maybe/maybe not process, and at this level still require considerable due diligence and a degree of open book reporting by both parties. And the pre-curser is clear demonstration of adequate accessible funding in the event of moving to action and contract. It wouldn't even surprise surprise me if the third party wasn't represented in the background at the signing process (and it certainly wouldn't surprise me if they already had some shareholding below 3%, probably bought at 0.80P, as a kind of sign of "intent"
IG - I can think of no other reason for the headroom than the one you state. You could argue that the shares are actually for the third party to buy, but why would SN want to do that?He actually dilutes his own equity by 25% in that scenario, and ceases to be the largest shareholder. He and ZM will (in my opinion quite rightly) want their shares maximised before the new world comes into play.
As for getting reserves onto the balance sheet. Well thy might make a token gesture at some point, but if I was SN I would only do this in phases, and only after a deal is done. And if I was the "third party" I would be insistent on this - otherwise they can't offset the costs with the emerging positive balance sheet (assumes some form of JV).
Just been watching Putin on the world cup draw and a thought came to mind. Its costing Russia many billions of pounds to stage this event when their currency is going down the pan. In 2018 they need the WC to get much need foreign currency in. Would they risk a boycott if they played funny buggers in Ukraine and Georgia - the USA would itching to withdraw (assuming they qualify) another Olympic type boycott? . I think all we will see is some posturing but very little else as they try to play the part of a good host over the next few years. A slight reduction in the risk from the Russians I think!
And before some smart Alec starts ranting about dilution or consolidation .... The money needed for the deep drills and lng can't come from dilution. Not possible. These negotiation and plans have been ongoing for 6 months at least. (Notably since we paid for cprs on deep resource that was never going to be booked as reserves, and that we that cant afford to drill to alone)
Why raise 1 billion of headroom if you plan a huge share consolidation. 1 billion, just the right amount for rpn conversion, not the right ballpark for the new investments related to ukraine expansion / deep drilling MK etc IMHO we will hear about farm out or sale or jv. And I hope/expect it will be soon. Weeks probably, months at the outside. IG
I've been saying for some time that the foundations for the future would be set during July. Beginning of the end game if you like. And following the ukraine announcement we're moving that way. Things could take months longer. But I personally expect them this week or next at the latest. Pressure will be on the bod to finally release information through the right channels! Frr (market cap $26mill) has been chosen to headline a huge political campaign in eastern Europe. Worth billions.
The ukraine deal requires vast investment. To deep drill and prove the reserves. To build lng site. This financing will have been being planned and agreed over the last few months. You don't sign a mou, in front of global leaders. And raise your head as new director. Without concrete plans. We will hear about these soon. CLNs reach one year to go next weekend. A decision will already have been made as to how we are going to manage them. And I think we will hear it soon too. Niko should be seeing first results within the next fortnight at the latest. Plus tarabani re fraccing - using our own fleet. Plus MK drilling campaign, and second rig expanding the existing wells. Plus the pipe expansion to 7mcfd. My expectation is still that we will hear about the rpn conversion prior to, or with, a vast update of much of the above. And soon. GLA
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