Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Sharebel
The credibility of the VOX comes under serious doubt when they are willing write this
"These results complement the deeper BFF reservoir's existing 250 mmboe contingent resource. In total,
88E is targeting 647 mmboe of prospective oil resources at the site."
When that 647 mmboe includes the Kuparuk at 56mmbo which did not even get drilled, and 341 of oil from the BFF, which has already been assessed (IER, by NSAI) at an 88e share of 28mmbo plus 57mmboe NGLs plus gas 72mmboe (all up 157 mmboe. Wowsers the bff has already shrunk by nearly half, and even more if you rightly take the gas off, which would only sell for $6 per boe into the pipeline, if it gets built
88e already know the 647 has shrunk by 184 in the BFF and a further 56 in Kuparuk, all up 240 smaller, but VOX has the bare faced cheek to print a number they already know is wrong
Wow Taximan, what a whopper of a line that is. I guess they don't say fully develop but grossly misleading never the less.
Good to see they qualified the statement regards natural lift to just the SFS. Although this still goes against previous inferences from 88e that Alkaid 1 was a SFS play.
Sounds so good it should be repeated;
'88E has a 75% stake in the acreage. As of March 31, 2024, 88E is fully funded to develop Project Phoenix and its other assets in Alaska, Texas, and Namibia.’
Here’s a good overview from Vox markets - notice the line here *** * ‘88E is FULLY FUNDED to develop Project Phoenix and its other assets’!!! ****
‘Positive results from multiple reservoirs means significant upside in future development via multiple commercialisation options. These include a farm-out to a strategic partner or early capital-light production, given the acreage's infrastructure advantage of being next to the Dalton Highway and Trans-Alaskan Pipeline System. The project benefits from the ability to produce concurrently from multiple reservoirs in a single development scenario.
Project Phoenix is being jointly developed by 88 Energy and Burgundy Xploration.
88E has a 75% stake in the acreage. As of March 31, 2024, 88E is fully funded to develop Project Phoenix and its other assets in Alaska, Texas, and Namibia.’
https://www.voxmarkets.co.uk/articles/88-energy-s-hickory-1-flow-test-yields-dual-success-unlocks-upside-in-multiple-development-options-73731a3/ IMHO DYOR
Scot I don't recall mentioning your mental health, many have but not me.
19:07
Simply not true, Prof Freud. I'm just a fundamental investor looking to build a consensus understanding of the facts of the investment case, leading to price discovery.
taximan57 - please consider how inappropriate it is to discuss another person's mental health. Let's keep it to facts of the investment case, there's a good chap. You're better than that.
You’re right Owls - the irony is that he seems to think we are all mad for investing in 88E and yet it is him with the obsessive compulsive disorder fretting and espousing on a share he’s not even invested in - sad for all of us to see and if only he could see it himself and his alter egos Older, Dealer etc.
I really am concerned about Scots mental heath. Even members of the panr board are questioning his activities on here.
The failed investment banker obsessed with this particular bulletin board. Emotionally obsessed (they do say never get emotionally attached to a share and I think Scot fits into this bracket) diversify your portfolio Scot don’t put all your eggs in one basket. But as an ex investment banker you should know this anyway. If you need to talk Scot just reach out don’t be afraid.
Scot, 'I want to chat with co-owners of a shared asset', that's the point you don't, you lecture, badger and belittle. And even try and convince holders to sell up and move to the neighbours. How is that chatting with co-owners of a shared asset? I was hoping finally that you could see sense with all the abuse you get but I can see that is wasted.
You are a twisted narcissist with a god like complex who only considers that he is above everyone else. Shame on you.
18:16
Enough of the personal abuse, chrisev1. Where's your considered response to the *facts* highlighted in the posts? What about your suggestions for tweaks to the assumptions in the calculations?
If you don't have the evidence to make a logical rebuttal then are we to assume you agree with the content? If that's the case, how can you possibly encourage other forum members to report or abuse me when you, yourself cannot identify a single error or miscalculation?
taximan57 - you wrote, "One final point, as a LTH I don't want to be told what is wrong with my holdings, I just want to chat with like minded holders who all hope one day to actually make money. No lectures required."
I understand what you have described. It's completely unrealistic but I can see that's what you would like,
In turn, I want to chat with co-owners of a shared asset whom all wish to arrive at a consensus understanding of the *facts* of the investment case. Thereafter what we choose to do with our own investment funds is up to us.
Scot126
There he goes again, exactly proving my point. Like clockwork.
[Part 3, continued from Part 2 below]
(viii) Using Friday’s closing prices of 0.225p for 88E and 32.6p for PANR, please find below an updated comparative valuation of both companies.
Assumptions:
GBP:USD = 1.237
88E SFS CoS = 50%
88E SMD-B = 81%
[In light of the recent flow test results, I assess most analysts would lower significantly the Chance of Success for the SFS and SMD. For the purposes of this exercise, I will retain management’s guidance. However, I will re-calculate the comparative valuations below using, I suggest, more realistic and downgraded Chances of Success.]
PANR CB outstanding = US$27m
SOTP for 88E: Namibia £2.4m (acquisition cost, insufficient empirical data, option value for now); Longhorn £6.3m (revalued from total investment of £12.1m due to underperformance of asset); Leonis £1m (insufficient data, option value for now); Umiat & Peregrine £0 (stranded and poor quality asset).
A downdip, lower classification, questionable commercial 88E Phoenix recoverable barrel in the ground is valued by the market at 18.2p.
An updip, higher classification, fully diluted, commercially confirmed (management and Schlumberger) PANR recoverable barrel in the ground is valued by the market at 13.8p.
[Revised value per 88E barrel using *downgraded* CoS for SFS (from 50% to 35%) and SMD (from 81% to 40%) due to disappointing flow test results would see each 88E Phoenix recoverable barrel in the ground valued at 24.9p. Note that I am not using olderwiser’s Netherland Sewell “shrinkage of BFF” logic as a readacross. Had I applied olderwiser’s analysis, an 88E barrel would be valued well in excess of 24.9p. I have kept the NSAI BFF P50 estimate at 102mmbo (net of W.I. but pre-royalties.]
Bearing in mind the disappointing flow test results and 88E’s demonstrably dangerous cash position, I cannot justify an 88E barrel in the ground being valued at any premium to a PANR barrel, never mind a premium of 32% - 80%.
Happy to discuss the contents of this post. /end
[End of Part 3]
[Part 2, continued from Part 1 below]
(v) Despite investing in producing assets in Texas (Feb ’22) to deliver dividends which would then be applied to funding future exploration and drilling activities, Project Longhorn has clearly underperformed all expectations. The initial investment of US$10m has seen a further investment of c.US$5m (in new acreage and workovers) and production is approximately the same as when initially purchased. There is a plan for 88E to invest a further US$3m to drill two new wells in H2’24, with a US$5m debt facility available for same.
At time of writing, and despite the redundancy of 88E’s COO on 29/4/24, 88E’s dividend from Longhorn does not even cover the company’s G&A + leasing costs never mind contribute a single dollar to exploration and drilling activities. By any measure, Longhorn has been a poor investment.
(vi) Previous management, supported by the previous BoD, invested >US$60m in a flight of fancy which saw 88E a) buy *at a premium* another ASX listed Alaskan company in which ex-MD Dave Wall was the largest or second largest shareholder b) raise large sums of fresh equity capital to drill two wells at a location that, even had the results been stunning (they weren’t), the asset would have remained stranded for decades or forever c) issue billions and billions of new shares such that there are now 25.12bn SOI and the current BoD is understandably considering a share consolidation in the near future.
Without a share consolidation, noting and accepting the common consequences thereof, the company will have great difficulty recapitalising the balance sheet to permit them to pivot away from operating in Alaska and to shift the primary narrative towards Namibia.
(vii) The rationale for undertaking comparative analysis of 88E and its direct peer, PANR, has illustrated accurately the risk/return inherent in the investment cases of both stocks. The premium value 88E enjoyed when comparing a Phoenix barrel in the ground v’s a superior (geologically) PANR barrel in the ground has decreased markedly.
An explanation provided by analysts focussing on the fundamentals of the asset suggests this is due to 88E shareholders belatedly confronting the data-supported, scientifically-consistent assertion that the downdip portion of the shared reservoirs is negatively affected by the effects of Dmax in an already tight-ish formation.
[End of Part 2, see above for Part 3]
Let’s summarise the 88E investment case after a consequential week.
(i) Both flow tests conducted at Hickory-1 were, at the very best, ambiguous. More realistically, they were disappointing. Of note, the SMD-B data relayed collection of only four stk barrels in the tank. Some posters on this forum think that by endlessly repeating the word “successful” it will somehow transmogrify into “commercial”. The company has definitively *not* declared commerciality of their downdip acreage in these stacked reservoirs.
(ii) With the exception of Dr Staley, not one 88E executive or board member has invested a single Aussie dollar in 88E shares. The most recent opportunity to support a fundraise was at 0.23p in November ‘23. No-one within 88E thought that was sufficiently attractive to invest their own money. Illuminatingly, MD Ashley Gilbert elected to a) take his first bonus in cash v’s shares b) sold his £200k worth of performance rights in early 2023 and c) was presumably the owner of some or all of the 84m performance rights sold in January ’24.
(iii) I am delighted to be informed/corrected but I am having tremendous difficulty recalling a listed company having to issue two further ANNs/RNSs in response to multiple legitimate, fact-based enquiries requesting greater transparency, to which shareholders are certainly entitled. This reflects poorly on the 88E BoD and executive team. Attempting to obfuscate and divert attention away from empirical data collected in the field serves only to undermine confidence.
(iv) Cash position. The company informed the market they expect to complete payment of costs for this winter’s operations at Hickory-1 by the end of June ’24. 88E’s next payment to the Namibian partners is US$900k, due to be paid by 1/6/24. Unless 88E’s 25% Working Interest (W.I.) partner, Burgundy Xploration, pays all or part of their percentage of the costs by the end of June (US$3.625m) then 88E will, by my calculations, be insolvent. I contend that the combination of the disappointing flow test data and Burgundy’s obvious difficulty in sourcing funds for their share of *last year’s drilling* of Hickory-1 suggests a high probability they will default, with their W.I. reverting back to 88E.
At time of writing, I am unaware of any other funding options open to the 88E BoD except to execute a steeply discounted equity fundraise. I contend a significant discount to the current SP will have to be offered to potential investors in the fundraise because they will have taken note of the flow test results and will be aware 88E’s only field activity which is financed is shooting 2D seismic in Namibia in H2’24.
[End of Part 1, see above for Part 2]