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I have no doubt the current board have the necessary contacts and financial experience to transact a decent sale of our Tanzanian assets. I am also confident they are looking at every senario, for example farm out not completing or Solo going longer term if no buyer is found. The only issue I have with them, is that they have granted so many warrants at such a ridiculous low price. I am hoping in the next few weeks we receive notice that they have reconsidered the price of warrants and they have set them north of 2p.
In the meantime it’s just a waiting game.
Good morning Chris, good for you, a easy wager for them.
We gave them a hard time over the "incentive" options, no incentive at all when we have already passed the vesting price.
Yeh, many thanks CP and BD be interesting to know what they decide regarding the options.
BD/ CP Great effort chaps thanks for the feedback much appreciated.
Don’t get me wrong, I like it as an investment. A nice long term play with huge upside. SOLO are just in a bit of a pickle since no one’s buying gas assets right now yet they don’t have the facilities to see it through to completion. Even a $20m sale would give m/c transformational and would give them flexibility to implement their new strategy. I just don’t expect them to get much more — though I hope I’m wrong!
I pretty much agree vike, in saying that,
EPS and 3 wells (flow rates pending post drill & workovers) gives a reasonable return for financed staged development, the volumes are not there unless they build the export gas pipeline.
The asset has significant upside potential for anyone wanting to JV with the Zubairs/Aex and now would probably be a good time pre CH-1 and post Zubair/AEX farmout.
I don't know about WEN, but a business with a stable income and profits and debt free is probably in a good place to raise finance if they felt the fit was right.
Either solo sell now or they drill C-1
The valuation is difficult due to the complexity of the development and the time it’ll take to get to a return.
If the buyer spends $40m (USD) to buy the asset, and another $35m to build, that’s -$75m out of pocket before a single dollar comes in. That will eliminate many buyers for a frontier market asset (including WEN, btw).
Receiving CF from 140mmscf/d production will take time. Any M&A team will model it better, but assumptions will include:
- Volumes based on a multi-well development, with several more drills needed. Est time for that?
- Infrastructure/pipelines will take 18-24 months post drilling. An EPS will mitigate a bit, though we don’t know flow rates
- TPDC will surely then take up their 20% of revenues (as is their legal right), reducing the buyer’s holding from 25% to 20%
- With natural gas prices plummeting, and an aggressive govt approach to IOCs, there's not guarantee we'll continue to get $3/mmscf going forward
- Infrastructure, if built by TPDC, will get charged back to us. If on us, who knows the costs.
In short, it’s $75m out the door in the near term. Who knows how long to start getting it back. Add the country risk, and the multiples go down fast.
It’s an awkward size – too small for the majors, and too big for the runts on AIM. It’ll take a Zubair Corp, or perhaps a Private Equity shop with no short-term demands from shareholders, to be interesting. Either way, we won’t get anything close to FV.
The real value here is 5+ years out, when we can enjoy a nice annuity over the next 25 years at minimal cost plus new exploration opportunities. Only IMO of course.
My mistake Vike, it' only around $32 million for 25% if the JV build the pipe and if the TPDC build the pipe then $24 Million cost for 25%
Hi Vike $40 mill is the FFD cost for 25% and that's to earn around $40 million per year nett for 25% so I don't understand your last statement.
Thank you Big D and Cperkin.. true gents, very much appreciated!
Please add my thanks too to you both for taking the trouble to act on behalf of the many.
Fell
It's a great reference point, and a ****tonne of dough. Of course, this latest group won't care what previous mgmt burned through, but important nonetheless.
I'd be surprised to see that much cash flow our way upon a sale, at least not before completing CH1 drill (which would add another GBP5-7m to our bill). That multiple vs. expected future cash flow from the field don't add up.
Yes Vike, I reiterated to them what has so far been spent on Tanzania, my calculations as per historic RNS’s are about £18 mill. Would be disappointed if they accepted anything less than £30 mill for our 25%.
BD, I recall you did an interesting back of envelope calculation of what SOLO has spent on Ruvuma so far. I think it's nearing about $15m or so. Now they're proposing chucking more cash at the project, with possibly no end in sight. It'll be interesting to keep an eye on those numbers to see just how above or below water this investment ends up.
Can't bare to consider returns from a 'risk weighted' perspective.
Thanks BD/CP
Caddy give it a rest. You are boring us all with your unhelpful, repetitive comments. If you are unhappy sell or do something useful.
The crooks in London Capital & Finance came across as very professional and ripped off £240,000,000 from it's investors.
Thanks to both of you for this.
Welcome, seems the main focus in the primary asset Ruvuma right now and the 14th July AEX/Zubair farmout. The BOD did say that they have had interest from multiple companies for solo's 25% and as BD posted earlier, they are prepared to continue with development if an offer at the right price is not made which is reassuring.
GL all
Appreciate your efforts both of you, and second that on protecting Tanzanian assets.
Shame we won't see another deal tied up soon after the failed Onedyas, but let's hope they start to communicate with us more in the future.
Thanks BD. Very pleased to hear that the recent financing will be used for tanz cash calls and protection of the asset.
Just finished the hour long call with the board. Chris and I made it extremely clear to them that the incentives warrants at 1.3p were totally unacceptable and we asked them to reconsider this. They are going to discuss amongst themselves in the next week and will let us know the outcome.
The $500k recently drawn down is to protect the Tanzanian assets against any cash call that could happen soon after the farm out completes. The board are not partly to this and know as much as we do to whether or not completion will happen in the next week.
We asked for an update on H1 and this will hopefully happen soon. Not sure anything has actually happened here though.
It would appear deals are very hard to complete at present as sellers and buyers have a very different view on asset value. Personally I cannot see any new assets being bought in the near future.
The board as always came across in a very professional manner and reiterated that they are working tirelessly to bring shareholder value. I stressed they needed to communicate this better to shareholders as presently we do not see this.
At present their main aim is to protect our Tanzanian asset and only sell for what they feel it is truly worth. I think most of us would back them on this issue.
I very much hope on behalf of Solo shareholders we have persuaded them to re think the warrant issue. GLA