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JB "SC you really are losing all grip of reality" completely agree and has been evident for some time, his post this morning is proof he just cannot see what everyone else AND the market clearly see's. Interestingly the total recommends for his morning sermons is steadily going down as more die hard LTH's see the light.
SC, a few points to help you.
(1) The Bahamas is dead, there will be no farm-in, this was plainly obvious straight after the P1 duster result
(2) If the S2 result is below expected then there will be no S3, S4, etc
(3) Expect substantial dilution in the near term, possibly taking the sp back to the pre consolidation price.
thanks Star for another well reasoned post. I wait for a pat on the head and a walk in the park. If we come across Johnbriggs, am I allowed to wag my tail and bite his leg?
Fatalcharm: PS.....feel free to PM me
JohnBriggs: I looked at your previous posts across LSE and you appear to take short brief pot shots, mostly negative. A recent comment on IAG was criticizing someone alleging they are a disgruntled ex-employee. So I feel honoured by your lengthy post today. Be assured I'm not as important as you make me out to be. Do you hold any shares in CEG?
SC you really are losing all grip of reality. In respect of paragraph 1, instead of some Machiavellian financial attack against CEG, I put it to you that this market simply does not believe in the investment case you’ve outlined and further, that this BoD however much it’s rearranged the deck chairs, has proven itself to be incapable and untrustworthy on numerous occasions.
You keep alluding to some covert manipulation or a plot by derampers, whether that be environmentalists or shorters, but I put it to you a spade is simply a spade and that the reason for CEGs current depression and overall predicament is because of the BoD and lack of trust in anything they say or do. End of.
So, you can quote all the technicals you like and allude to sinister lots and conspiracy theories that have people like fatal charm hanging on every word like a lap dog, however, the simple truth is that nothing short of a miracle or a at the very least a complete reversal of fortunes in the Bahamas is going to bring this back from the dead.
Time to stop playing to the gallery, face reality and stop pretending you are that bit more informed or insightful than anyone else on this board. It’s just complete narcissism otherwise.
Fatalcharm: I agree with you on many points you have stated over the months.
1. The company is not doomed as it is producing approx $8m gross. The current SP and MCap are absurdly low considering a spud has been done and test results imminent. It makes no logical sense using various metrics I know of: turnover, revenue, asset value, potential, +/- $25m tax credits…. All underpinned by $70 PoO. It is the sort of value attributable to a Saffron 2 result which has been proven to be a total failure, with no hope of S3 or Suriname being successful. Let alone the possibility of monetizing Bahamas IP or getting a farm-in. I’d go further that there appears little interest in speculative short-term flutters by traders in the event S2 is a success, which is very unusual for small AIM oil/gas companies. Over the last few weeks large buys have been offset by a combo of large and small sells during low trading volume resulting in CEG losing 40% of its value since the OO/placing. Some sells could be stop/losses. The current price correction downwards is very unusual and gives the impression of manipulation to artificially reduce the SP. Either selling at a loss, to make money from shorting using CFDs/derivatives or the possibility of other factors I do not want to spell out in public. Hint: (a) who would benefit financially in 2021, with a lower SP? or (b) what wealthy entities may want to lower the SP (or even destroy CEG) for non-financial ideological reasons and don’t care having a 6 figures loss in the process? However, if S2 is a success, (and/or other positive news) manipulators will have a problem.
2. Since my 25/7 03:25 ‘CEG’s certified oil reserves,’ post, there’s been a lot of debate with some anti-CEG commentators and shorters nickel and diming how many 10s of millions of bucks CEG has in proven, probable, and contingent reserves. I gave some figures based on gross revenue @ $60 PoO, even though it’s currently $70+. Gross means before deductions of anything including G&A, royalties, taxes, opex, capex, labour, extraction costs. The ultimate source of my opinion was https://www.cegplc.com/operations/results-from-the-cpr/ and maximums based on success cases over several years of decent extraction production. I wish anti-CEG commentators wouldn’t read my posts as if they are an RNS and pick up on points as an excuse to enter discussions to create even more negative commentary for their agendas. Or worse, to allege I wilfully mislead which I do NOT. If S2 is a success, a subsequent CPR will change all the goal posts, so it’s not worth those folks beating on this point anymore.
3. The BoD/senior exec incentive scheme: I gave my thoughts diplomatically, as point 3 in my 24/7 06:42 post.
We await news
IMHO. DYOR. GLA.
2P reserves are Total proven + probable
Columbus presentation 2019 has a good breakdown of estimates although EPI at the time did not know depths of net pay.
There is a plan showing contours of P90, P50 and P10. They estimated a mean value of 11.5m barrels from the lower Cruse. At the time the seismics were showing 3 thin horizons (I can’t remember how deep ) but I’m sure they didn’t total 63’.
Measuring the P90 area x depth x 6.29 barrels/ cube is a lot more than 11.5m but I will leave that to the experts
Always seems odd when I’m arguing upward for CEG but I’m afraid you are confusing terms here. The 2P is the central case estimate you should use for a valuation as the amount of oil CEG will produce, rather than you having to multiply it by some recovery factor.
You are confusing it with oil-in-place, where a reservoir engineer report will estimate the total oil in the reservoir. Then reserves are a portion of this: an estimate of the percentage recoverable of that gross amount. For mature fields it’s a bit different: the oil-in-place reservoir capacity will be well understood by now and maybe 20% of that oil has been recovered. The difference between 1P, 2P and 3P is now simply whether another 2%, 4% or 6% can be extracted.
2P reserves can achieve 50% to 89% retrieveable barrels
Someone quoted $60 x 1.29m barrels is what I was referring
My slip the company has 2P reserves of 1.29 not Saffron
I’m sorry for that but the total values will therefore be less as Goudron ,IT and others only have $30 gross revenue after tax and royalties based on $60
What was misquoted? Where do you get 645,000 from?
And since the 2P reserves are nothing to do with Saffron, why are you linking the 645,000 to Saffron's potential 200bopd?
I was putting some perspective on the 2P figures that were being misquoted this morning.
To put Saffron into context I am expecting the pressures on the Lower Cruse to diminish quickly ,the more drills into it will increase the depletion timescale . Under pump it should last a fair few years.
For one drill
645,000 •/• 200 = 8.8 years
1,148,000 •/• 200 = 15.7 years
(Not including down time)
2 to3 drills will need waterflood sooner, or the minimum value will be the more achievable than maximum
Zag, don't worry about Bamps, he has lots of prior experience with this group, he knows what's coming.
He saw what S1 did for Leo (AHTPP), sorry, I mean, what S1 did for CERP! (Silly old me, that was quite different for Leo. Ja)
You need to.put these numbers into a prospective time frame and expected bopd instead of just random values as these $$ a years in the making
2P reserves are proven plus probable
CEG have 2P reserves of 1.29m
That means retrieveable reserves of a minimum of 645,000 barrels and a maximum of 1,148,000 barrels
Cerp estimated that Saffron would produce $50 per barrel gross revenue after tax and royalties on a $60 price
645,000 x $50 =$32,250,000 min
1,148,000 c $50 =$57,400,000 max
So with all this supposed oil could you kindly explain to a numpty like me why people aren't clamering over each other to get shares in CEG.
Maybe just Maybe you are again pushing a false narrative!!!!!!!
I didn’t misquote you - I asked what you meant by “worth”. So can I take it you mean your $77m is a 10 year (life of licences) revenue total? And that you accept it says nothing about whether CEG will ever make a cent of profit from these fields?
Yes I am still short, largely because I don’t believe they’ll ever be profitable if S2 is less than a clear success (200b/d sustained for 3 months).
Bohemia: about to do family stuff.
Please don't misquote me. I used the term $60 GROSS even though PoO is over $70/b today. As for the maths, it shows totals GROSS based on if the CPR estimates are 100% reality. Gross means pre capex, G&A, labour, extraction costs, opex, loan interest, office cat food etc.
As for shareholder value, I would say the potential is obvious. However until the oil is extracted no money is collected unless the asset is sold.
Are you still shorting?
Parpaing: re your comment to my morning post…. ‘We have had more than one CPR in the Bahamas which resulted in nothing’.
You are correct. From recollection there were 2 Bahamas CPRs done. Assessing the potential of wildcat frontier offshore including CoS etc is different to decades’ established onshore regions such as Trinidad. Many wildcat CPRs often use the terms 1U, 2U, 3U in reference to undiscovered hydrocarbons; 2U is roughly the equivalent of 2P proved + probable reserves, although it is important to remember it refers to undiscovered hydrocarbons.
The proof is in the pudding. 2P reserves can be borrowed against (subject to other factors such as a decent balance sheet) with reserved based lending at $1m-2m per 1mboe, But 2U reserves (….not to be confused with U2 the rock band…..) cannot.
“worth $60 x 1.29m = $77.4m gross.”
What do you mean by worth? What relevance does the $77m have for a shareholder?
No barrel of 2P is worth anything like $60 to CEG. So far in 2021 it looks like they’ve received pricing from Heritage at about -15%, consistent with what the other operators are saying. Then they pay royalties on that revenue, 28% as last reported. And then they have the opex, $4m in 2019. Based on 424/day production for 2021, that would make a gross profit to CEG of $11.3 per barrel. 155k is about 12% of the 1.29mbb, netting $11.3.
But 2P reserves are assessed until the end of the economic life of the production. This therefore includes the last barrels from each well before their production declines to the point where they are loss making. The last barrels are therefore the marginally economic ones, less that a dollar a barrel.
So overall each barrel is worth between $11 and zero. $8 would seem a generous average, even before you discount it for an NPV. About $10m for the 2P number (before we think about >$2m decom provisions).
And then what is a 2021 barrels worth to a shareholder? Of course like every other barrel in the last 5+ years the $11 of gross profit will be eaten up by G&A. Nothing left for shareholders, not even a cent to fund capex.
We have had more than one CPR in the Bahamas which resulted in nothing.
Refer to CPR summary https://www.cegplc.com/operations/results-from-the-cpr/ with my updates below based on $60/b PoO.
• Certified 1P reserves means more than 90% chance CEG has 690,000 boe, worth $60 x 690k = $41.4m gross. This excludes SWP + Suriname.
• Certified 2P means proven and probable. CEG has 1.29m boe, worth $60 x 1.29m = $77.4m gross. This excludes SWP + Suriname.
2P definition…’known oil that is capable of being produced economically, and thus the 2P reserves as certified by ERCE relate solely to production capable of being generated from CEG’s existing wells 2P reserves do not assume any contribution from infield drilling and enhanced oil recovery projects. Moreover, apart from routine Opex required to keep wells online, accessing this production potential does not require material amounts of capex….’
• Certified 1C contingent resources means subject to Capex, a more than 90% chance CEG has another 710,000 boe, potentially worth $60 x 710k = $42.6m gross including Suriname, but EXCLUDING Saffron and SWP
• Certified 2C: subject to Capex, CEG has 7.46m boe potentially $60 x 7.46m = $447m gross including Suriname, but EXCLUDING Saffron and SWP
• Certified 3C: (less than 10% chance of exceeding) Subject to a lot of Capex, potentially 24.7m boe, worth $1.7 Billion, EXCLUDING Saffron and SWP
2C definition….’ oil that ERCE considers can be producible from the existing discovered fields, albeit contingent on Capex for infill wells and successful waterflood and CO2 injection projects. As future capital is deployed it would typically be expected that the 2C resource base would migrate into the 2P reserves category upon demonstration of commercial viability. As such, the certified 2C resources position provides validation of Challenger Energy’s capacity / strategy to achieve near-term incremental production growth, as well as providing clear direction as to capital prioritisation during 2021...’
Where we are today
Saffron 2 has 300-370 feet of net oil bearing reservoir sands. It is being tested over the next few days. If successful it will help de-risk Saffron 3 – 9. And the whole South West Peninsula potentially holds 220mboe, worth $13 Billion gross @$60 PoO which is the equivalent of a North Sea field. None of this is reflected in the above CPR summary.
Why I invested heavily since the Percy-1 result was the risk/reward spread, based on Ex-CERP asset potential. It was no longer a case of having to fund offshore exploration and appraisal wells @$50m a pop nor a win or lose binary result.
If everything goes wrong, I will lose more money. At the current ridiculous £15.3 MCap, the market seems to think CEG already has, despite $8m/yr gross revenue. If everything goes right, shareholders will do extremely well. I believe LTHs will be delighted for somewhere in between.
Patoir: well noted. I agree with you.