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A non-profit oil and gas analyst? Never heard of such a conflict.
Https://ieefa.org/resources/beetaloo-10bn-pipe-dream-gas-producers
Very negative “financial look” at the Beetaloo but when you look at who funds this “nonprofit “ you see a lot of climate change activists.
OIlcountry - good assessment. The only other thing I willadd is that if we start seeing stellar results and global LNG prices hang in there, we might get more interest in this than just BS, whcih is what we need to get a good price. I am not holding my breath, but I think it is possible. On the LNG front, there were several good articles out yesterday and today including this: LNG growth to be met by other countries if US walks away – Baker Hughes CEO - If the U.S. pulls back from permitting new liquefied natural gas (LNG) export plants, demand for the fuel will still be met from projects in Qatar, Argentina and Africa, the CEO of Baker Hughes, the world’s largest provider of equipment for the LNG sector, said on Thursday. The Biden administration in January paused new export permits for LNG projects to study the impact of further expansion, a move that has drawn criticism from LNG companies and their advocates. “We believe by 2030 there needs to be an installed base capacity of LNG of 800 million tons per annum and either through U.S. projects or international projects,” Baker Hughes CEO Lorenzo Simonelli said in an interview on the sidelines of CERAWeek conference in Houston. (Reuters)
I will also add that a fair price is relative to your cost and time held. I’ve been here for about almost 18 years (FFS) and was expecting the to be at $10+ by now. So I’m not going to be happy regardless but hopeful to get a significant amount of capital back with a small return. Many others could have a much lower cost and shorter hold, and will be happy with a 2-3x of current price. GLTA.
Longknife - for what it’s worth I also agree with you. I can see BS quietly keeping a lid on this and accumulating while it’s being derisked. At such time that he’s sufficiently satisfied that the value is there to proceed he will put an offer forward that will need to be put forward to shareholders. I feel there are sufficient long term holders who will support anything that’s reasonable. We just aren’t negotiating from a position of strength and BS knows that. We need cash to participate in future wells and regardless of the instrument that’s used, it means further dilution. As such, I anticipate an offer within the next 12 months that will result in sale. While I hope to be surprised to the upside, I feel there will be sufficient support for existing holds to get majority approval for a valuation that most of us will be disappointed by.
Saying the stock will go for 2-3x the current share price or in Other's opinion, 5-6x the share price doesn't mean I think someone is going to say "hey let's offer 2-3x what the share price is today." It's that that's what I think it will be sold for. What the "fair market value" will end up being. Also, the difference between 3X and 6x the current stock price is about $300M. Not a huge amount. I hope I'm wrong and that it is $3B! Whatever the "fair market value" turns out to be (if it's sold), I am sure most here will think it wasn't "fair".
The following link is courtesy of craigaus69 on the HotCopper Tamboran board and has good indications for the forward pricing of nat gas in Australia -- that might help Falcon get a better price in 18 months time. However, two or three months time would be much more appreciated -- hopefully -- LOL.
https://aemo.com.au/newsroom/media-release/gas-market-outlook-signals-need-for-new-investment
From what I perceive, Falcon's fair value has never been about the "daily sp". The daily stock price is just noise. The true fair value of this bird is when we wake up to read the RNS that Falcon Oil & Gas, Inc has been sold for a price of X amount. I have to agree with WetWater and others. Collectively, the market will decide on Falcon's value when it is sold, not the daily sp. But it is fun to speculate. GLTA
Longknife: When Falcon sells, it will receive a 'fair value' for its 1 million acres of the Beetaloo - I can't put a pin in that 'fair value', but the market will help establish that price. There will be multiple buyers interested in Falcon's acreage - let's let these bidders establish a value and see how their bids aligns with the BOD's. My point is that the valuation of Falcon's acreage will be based on a fair assessment by the market rather than a simple multiple of the current stock price.
As far as timing, I refer you to Philip's estimate of a deal being done with 18 - 24 months. That being the case, in Falcon time, that's just around the corner!
If that fair value is US $.25 - .35, so be it, I am hearing a minimum of US $.60 - and some people I put credence in go up to US $1.00 - we shall what the market thinks as pricing will be out of our hands.
Too cloudy to view the flare on the Sentinal hub today, the last available picture was from 13th March:
https://apps.sentinel-hub.com/eo-browser/?zoom=16&lat=-16.84132&lng=133.65219&themeId=DEFAULT-THEME&visualizationUrl=https%3A%2F%2Fservices.sentinel-hub.com%2Fogc%2Fwms%2Fbd86bcc0-f318-402b-a145-015f85b9427e&datasetId=S2L2A&fromTime=2024-03-13T00%3A00%3A00.000Z&toTime=2024-03-13T23%3A59%3A59.999Z&layerId=6-SWIR&demSource3D=%22MAPZEN%22
Anyone have any flare overheads from the site?
Wet,
Sounds great! And I hope that's the case! However, when you say; "Falcon's currently depressed stock price doesn't even come close to reflecting the fair value of a 500-meter SS1H well - much less when the pilot program kicks off with its first two 3K wells to better prove commerciality.", then surely the entire acreage is worth way more than 6-10x the current stock price?? We will see if there are buyers that come forward- I don't think POQ has done any groundwork to line up buyers given the well numbers work out. If they don't or if BS exerts enough pressure on his friends, POQ could be sitting on this stock for years and years and hopefully we will be able to receive some dividends at the very least. Which buy the way, might not be the worse thing for BS's interest in Falcon- which is sure to grow. JMHO. I guess we will see what happens.
Willowgrove and LongKnife: Falcon's board has always been in tight agreement with our CEO that the objective of our non-operating company is to sell its interest in the Beetaloo for what the ACREAGE IS WORTH - not based on nor having anything to do with the current stock price of Falcon. As we know, Philip is not one to prop up or hype Falcon's stock price - IMO, he could give a #hit what today's stock price might be - he has always told me, as he has many others, that you won't realize the true value of Falcon until the hammer drops. Falcon's currently depressed stock price doesn't even come close to reflecting the fair value of a 500-meter SS1H well - much less when the pilot program kicks off with its first two 3K wells to better prove commerciality. The board members are not idiots - they realize the potential value of Falcon's 22.5% of the Beetaloo - the 'largest undeveloped shale basin in the world' They are not looking to give it away for 2X-3X valuation of what, IMO, is a purposely depressed stock price - for what reason I do not know.
I agree with Newt - I suspect we will see between 6X and 10X today's stock price - that range has a lot to do with the timing of any offer received. If the next two wells come in at 18-20 mmcf/d, eyebrows will be raised across the industry, and then Falcon will begin entertaining offers which hopefully meet the board's expectations - if we make it till those two wells are completed with 90–120-day flow rates, then I will be happy that I didn't sell out for 2X - 3X of today's price as you gentlemen suggest.
GLA
You are wrong Mr WillowGrove. And for the record so are you Longknife = so very wrong indeed.
I stand four square with Mr Newtofo on this. I like too Mr Wetwater's earlier comments. Moreover I'm very confident that the list is a lot longer than you think Mr Smallfish. For the record there is quite a few of us who have reached the same conclusion as Mr P:oods.
Newt isn’t stupid. BUT… it’s comical to suggest that the Board of a publicly traded stock would “not entertain” an offer for 3x current market price. Stay objective Mr Newt!!! You were young man when you invested in Falcon. No longer.
LK, This shows how ignorant newtofo is about this stock or any stock for that matter. What a fool, clueless.
Newt, I have never seen a CEO or BODs NOT entertain an offer for 2-3X their current share price. Remember, the market has built in the potential it sees for FOG right now- we may not agree w it but it is what it is. I would be thrilled if someone like Inpex came in w a bid for 800M but they certainly don't seem interested yet. Yes, we can say "wait until the 90 day flow rates" or "the next two wells" etc, but we have already shown we have no idea what the catalyst will be to move the stock price. We all thought it would be the recently announce stellar flow rates. We were wrong. As far as rather seeing FOG go bust trying for a higher price in the next 18-24 months (which seems to be the new talking point as far as timelines), vs take 2-3x the amount........I disagree and will take the 2-3 bagger.
P.S. -- it is also worth keeping in mind that Falcon had the ROFR on Origin selling of their interest, and so any ROFR might be with Falcon, but certainly not with Sheffield or Tamboran. That ROFR that POQ originally put into the Origin deal back in 2014 was the reason that POQ negotiated the extra $6.75 million contribution by Tamboran towards the next two wells, (after the 9 well Origin program was completed), and how POQ was able to also negotiate the opt-in or opt-out clause on all future expenditures. That opt-in or opt-out clause is for Falcon's benefit and will belong to Inpex or any other purchaser going forward -- so certainly has added value to any buyer of Falcon's 22.5% interest in all three permits.
Note -- after all the years that I have been invested in Falcon -- I will tell you (and will tell the same to POQ) -- I would rather see Falcon go bust trying to get this deal done in the next 18 to 24 months for six or seven times the current price than to ever sell for two or three times (and would vote for that position as well if it came to a vote)!!
Smallfish and Longknife -- I am fairly sure that Sheffield does not have any kind of a ROFR (right of first refusal) on Falcon selling their interest to a third party -- as POQ has never brought that up in any discussions nor investor presentations. I would agree that Sheffield most likely has a ROFR with Tamboran -- as he has more invested in his partnership with Tamboran -- plus bought out the other 38% of Origin's interest almost two years ago, so ROFR would surely be in place with Tamboran.
There is almost zero chance that POQ -- nor the BOD -- would even entertain an offer for Falcon that was 2 or 3 times where it is now, but any offer that was five or six times what Falcon is currently trading at would have to be taken to the Board of Directors for their input. If you talk with Cavendish's analyst, James McCormack or the analyst at Tennyson -- they will tell you clearly that Falcon should be trading two or three times higher NOW on this stellar flow rate, but certainly not a chance that Falcon would entertain this low of an offer.
Keep in mind smallfish's caveat about a vertically integrated producer from Japan, Korea, or China having a greater tolerance for risk and a motive to be a non-op going forward. Inpex has spent over $35 billion dollars developing the Browse basin and their two LNG plants in Darwin. Inpex wants to build a third LNG train in Darwin, but needs access to 5 TCF of gas before they can commit to have that third train built by 2030. I don't know the exact figure, but there is good reason to believe that the Core dark blue area in Falcon's permits, which covers one million acres, may have around 5 TCF of recoverable gas to Falcon's side of the equation. After spending $35 billion for their two existing LNG trains in Darwin -- it may not be a very big gamble on Inprex's part (or one of the other asian integrated players) to spend another couple billion to access Falcon's share of that gas without any interest in being an operator at all. Inpex would have to buy out Falcon's interest for something like 800 to 900 million and then have another $billion to cover their share of forwarding operating costs as the one million acres gets developed, but that is a significant discount to what it cost Inpex to develop the Browse underwater gas basin -- with it's 12 TCF of recoverable gas in place.
I tend to agree with you, he has an advantaged position with access to all the technical data across all operators. Combined with a tolerance for early stage activity he is in a very good position.
It will be difficult for a laggard to value this heavily without production history, almost impossible really. The caveat I would put on this is that a vertically integrated producer from Japan, Korea or China would have both the tolerance for risk due to greater reward and motive to be a non-op going forward.
That's the only challenge Sheffield faces but he probably has ROFR's on everything anyway. I'm in agreement with your take.
Newt and Smallfish,
I still think the most likely scenario is Sheffield and his friends taking FOG private at a multiple of 2 or 3- not 10. Some will argue it is worth more but most shareholders will be happy to take the 2-3 bagger and be done w this stock. I don't see any white knights coming in to save the day either and there is ZERO retail interest. Maybe it will get bid up some if an offer is made but again, I don't think it's going that high. JMHO
Very informative post smallfish9.
Given the successful flows from the SSH1, it is also good advice on Falcon participating in the next two horizontals -- even if it requires something like a ten percent dilution of Falcon's stock to make sure Falcon is going to reap the benefits of that 6400 acre block. I am fairly sure that POQ intends to participate -- as something like a 15 bcf EUR on the next two 3 km horizontals will only add strongly to the valuation metrics that will help any sale going forward.
I am also fairly sure from previous investor presentations -- (going back to when Tamboran and Origin were structuring their deal) -- that the real benefit of the opt-in or opt-out clause was described as a safety valve if any of the Tamboran planned future 6400 acre blocks were in a very questionable zone. A good example of where Falcon would maybe want to opt-out would be if Tamboran was planning on going back into the Lower Kyalla -- which we already know is going to be a very difficult zone to crack. In this scenario -- opting out might be the wisest choice until that Lower Kyalla zone proves up. However, the SSH1 area has already proved that it is a winner -- and doesn't have the risk profile that would require POQ to even think about using the opt-out clause in this situation IMHO.
Here's my quick calcs on the value and spacing units from a while back:
________________________________
Indeed, 6400 acres/185 acres is 35 spacing units (@ 2,500 by 300m). At 15 bcf EUR (a humble starting point of 6 bcf/1000m) you would be relinquishing about half a TCF of 1P at development. Using $4/mmcf you end up forgoing 22.5% of the value or about $470 million.
And it would probably come with a back-in penalty and further abuse in terms of being unable to access a facility.
Better off to just get abused.
___________________________________________
I would add that this is on a single shale, with facilities paid for and the development of the C shale understood there would be approximately double the value and well count considered above, albeit at a significant delay to the initial shale being developed.
You could say that 3,000m wells will be executed but that only cuts it to 29 wells to develop 6,400 acres - the point is you don't want to be there.
There is some thinking that non-participation the 6,400 acre block would somehow benefit Falcon. While it would certainly reduce the short term need to raise capital, the whole point here is to leverage money to make more money. Disposing of some portion of a half-billion dollars in developed value (and more in long run) is not constructive to Falcon's valuation. I understand the idea that 'you're just going to flip it and move on' but I consider that unlikely without well defended valuation. Non-participation signals to the market that you can't or won't be bothered with raising the money. I'm curious whether that's even a defensible fiduciary posture for a CEO? You'd have to assume risk and scenarios that are not likely. If you're optimisic it signals you're going to ride out your ownership stake and see what you're going to get, a more critical evaluator would say that you're just going to dead-beat it for the long haul and continue farming down and relinquishing value/influence. Insert comment about a more engaged CEO here...
I've not lived one of these clauses out in the court of time, to me they feel like relatively poorly conceived offshore sourced clauses where you have an exploration block to consider. IE, you don't believe the block has the potential to succeed so you just back away and don't participate. If you get it wrong and the first well is a rager, you pay your penalty and can back-in and participate going forward.
Shale wells aren't designed to be independent of each other, additional wells are not added to accelerate the production of a given pool. Rather, they are drilled on spacings and fracked in a manner that drives the optimum economic KPI for a given operator (free cash flow, reserves, ROI, NPV). My point is that you cannot be part of some of the wells and not the others and have a defensible position. In my view, the certain endpoint is a dispute where you're arguing that you deserve to hand-pick individual wells for participation.
With the sp not moving more but I cannot see anything happening with Falcon management any time soon. The only thing that I think will improve the sp here will be further development by Tamboran/Falcon, Empire etc, further good results and eventually the decision by Falcon to sell their shares a multiples of the current sp.
So, to me it's a waiting game for between 18-24months by which time I think a decision will be made by Falcon to sell their share. All imho.
Atb,
Northern