Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Nobody can say how much Lombard are selling and if and when they will stop and that's the point.
My opinion is they won't be sell everything because I have recorded their patterns previously as a means to establish when I thought the SP was going to push on from 50p. They have to date being very forthright, reporting every percentage threshold, which is rare. The last sell off went through several percentage barriers very quickly so could be put down to speed rather than a change of tact.
All other drops are reported by percent and they have had enough opportunity to sell into this market since the last threshold was breached on 11th Sept.
So whilst anything is possible, the percentages point to a de-risking of their position and not a rapid exit for the door. But until that is confirmed it will sit over the share and many will sit on the sidelines awaiting a driver for a change of direction.
I am not assuming that Miton's sudden sell of is due to external issues. When they last reported on 24th July they went very quiet afterwards when there was opportunity to sell. They then suddenly sold off circa 5% off the back of the well result.
My view is they were the party with the stop loss in place and the MMs took full advantage but it is only a theory.
Food for thought ....article by Alan Foum Consultant Geophysicist .......
Risking is generally done by the asset geoscientists working on the field, and would be reviewed by a centralised review team.
Like exploration risking psychology plays a major factor in risking appraisal and development wells. This is usually done by the reservoir development team and is usually reviewed by a review team. There may also be effective review by joint venture partners, which I have personally found most beneficial.
In my experience major biases are more frequent here than in risking exploration wells. I feel that this is because the geologists know something about the reservoir and assume that they know more than they actually do leading to anchoring. Other biases such as groupthink or clique think and focussing on too narrow a specific problem while not thinking about another are also common. Reservoir teams tend to be more isolated than exploration teams and are very task focussed. They may also be located in a satellite office with few other geoscientists to ask.
The only way we can try to overcome these biases is by effective questioning and challenge, inclusion of remote teams and by sharing examples, particularly disappointments which tend to remain hidden by being brushed under the carpet.
I would humbly submit that it is the availability of funds to progress the development wells next year, thereby generating all-important Phase 1 cash flow to implement the staged development of Liberator and Serenity, that is behind the outsized sp fall last week.
Some shareholders have probably deduced, quite wrongly imho, that the Senior Loan facility is/was a binary decision based on the L2 pilot well coming in. Others will have deduced that the lesser likelihood of the Senior Loan facility in its full extent after the L2 pilot well means an equity placing coming up shortly.
Neither is a given, but either would pour oil on the fire after that pilot well disappointment.
This is AIM. AIM shares sink or swim by the ease with which they can attract capital and minimise ongoing but inevitable dilution, before they (ever) become cash generative.
In simple terms then the SP whilst oversold maybe should be somewhere between here and 56p.......so 40p would be a realistic figure imo
Should get an RN this week and I expect 35-40 min
I didn’t know Lombard were selling out the entire holding.
Wow. How did you find this out? Lots of us lesser mortals have been trying to find out but you must have some amazing sources mate.
I wonder what I3E meant when they said they had institutional support in their Friday Q&A?
No TR1 from LO, so that puts the persistent II seller theory to bed, at least for the time being.
The RNS could come at any point in the day so no counting chickens!
This does have to turn at some point though!
(1 of 2)
Good morning O&W.
Just picking up on your post from yesterday, I certainly agree that there are a number perceptions in play here that are driving the short term turbulent movements in the SP.
I agree wholeheartedly that there is certainly doubt over the current advertised funding levels for the Phase 1 development and it is as far as I can see driven by a misunderstanding of the maneuverability that I3E has with their lending.
I do however believe that it is more complex than that. There is a lack of information on what the L2 result actually means for the reserves that are defined in the 2 CPRs. That should hopefully be cleared up in the next LP2 update. In the meantime the market is playing it very safe, which is understandable. If we add in the doubt over Lombard and their remaining 11% and in my opinion a number of shorts that are taking a short term position based on all of the above doubt, then we have enough to upset the market enough to create this disconnect between what I3E is and what is perceived today.
I believe the shorts issue will come to close soon enough because there simply isn't enough information right now to justify a sustained push south and as far as we know the Borgland Dolphin is being readied for the A3 spud, which even at an adjusted COS, a theory that is not proven at this time, the risk reward offers considerable upside on a positive result there or at Serenity.
Lombard wise I have shared my view already that I don't believe their goal is to sell down hard or indeed to disrupt the market unnecessarily. Its an opinion based on watching their sells over the last few months or so.
So we are back to those reserves and the perception of what I3E can achieve with what they still have.
Contributors across the many social media outlets can try to undermine the reserves base as much as they want but the fact is the oil is there and the latest company interview states that the affect of LP2 will be on the 8mmbbl of reserves attached to that area only. That could change but it is current until further notice.
LP2 as we have established over the weekend, is designed to pick up oil through a horizontal section of the southern section of Liberator Phase 1. Therefore, there is oil there still but it is now about how much and how they re-design their wells to exploit it.
Currently the latest report from I3E is that they still have 13mmbbl of reserves plus LP2. 8mmbbl of these reserves are around the LP4 area, which were classed as contingent resources, Development unclarifed. The relocation of the drill centre to the edge of Liberator East has allowed those contingent resources to be turned into reserves (development clarified).
(2 of 2)
So the statement by I3E management has validity. The question is therefore about how what classification of reserves they are (proven, probable, possible). That classification will help determine the percentage of NPV (over simplified for this post) that the lenders attach to the total reserves in each class.
The key point here is that the belief that the funding is based purely on Liberator Phase 1 as it exists in the Phase 1 CPR is wrong.
Liberator Phase 2 holds 22mmbbl 2C resources that are classed as "Contingent Resources, Development Unclarified" (CPR Phase 2 page 6).
8mmbbl have been transferred to the reserves class, likely 2P, which would place them in "Approved for Development" class and in doing so secures them a far higher grading from the lenders on the discount to NPV scale.
In addition, the other 14mmbbl of 2C resources should be able to be included in the RBL calculations be it at a far lower ratio. The last known information I have found states 20%.
However, as we all know the A3 drill is looming large and should take centre stage to things long before the RBL is agreed and the lenders have done their due diligence.
Hence why I3E have stated that the RBL is dependent on a successful summer drilling campaign at Liberator and not at Liberator Phase 1.
A3 was always going to be a big drill because it potentially unlocks the substantial upside in Liberator Phase 2. It is now more so because of the result on LP2 and the fact that it comes prior to any further discussions on the RBL, which would always have been the case but is now more prominent.
However, the size of the RBL will be determined by both the technical results of both drills and the company can still secure funding based on the whole Liberator area and so the calculation/valuation and validity of Phase 1 should not be conducted on merely the assumption of how much recoverable oil Liberator Phase 1 holds in it.
BBN - regardless whether technically phase 2 reserves could be used against an RBL facility, I'd be highly surprised if a lender took into account phase 2 reserves for a facility that is required for the phase 1 production. Reserves that are not on production and not much use to a lender, its primarily the security against the cashflows they want.
I still think there is a significant risk here that the available facility size could be substantially reduced due to the result of the pilot well.
@spike501 Fair enough as is your prerogative but I disagree.
With all due respect you are demonstrating a misunderstanding of the data and the progress made by I3E since the CPRs were completed.
Firstly, in UK jurisdictions RBL providers will consider reserves across all fields that are held by the proposed borrower.
Secondly, and far more critical the reserves defined as Phase 1 are only Phase 1 because that is all that I3E owned at the time it was produced. Despite this the Phase 2 CPR stated that Liberator Phase 2 warranted 2C resources of 22mmbbl but defined them as "Contingent Resources, Development Unclarifed." (CPR page 6)
They also made it very clear that "because the area is un-licenced, resources cannot be classified as Reserves." (CPR page 4)
By acquiring the neighbouring block 13/23c I3E were able to update their development plan, move the drill centre and include an estimated 8mmbbl of 2C contingent resources as reserves because the development is now clarified and the bloack now licensed.
So it isn't phase 2 liberator anymore it is an extended Phase 1.
The rest of Phase 2 has been designated by the company as being Phase 2 but it will still be counted as part of the RBL if the resources can be classified as reserves with a development plan.
So a scenario.
L2 proves to be limited in its scope for reserves. Therefore, I3E would need to run with their back up well, which is L4, although that well is actually part of the stated first 2 well production (L2 + L4).
A3 is drilled and delivers a mid case result. Liberator East would then be further de-risked. If some reason I3E are struggling to get the level of RBL finance their desire from their 2 production wells (L2 and L4), they could easily switch focus to the Phase 2 area and run an alternative scenario of L4 + a new well that runs into the remaining 14mmbbl of reserves that are in the Liberator Phase 2 area.
Alternatively, if L2 and L4 are of sufficient size to achieve the desired level of funding, then the company could update their development plan to include the additional northern well, thus demonstrating it has a development plan and CAPEX for the lenders to assess as they see fit. Hence the flexibility.
Because the plan is flexible and not as rigid as the market is determined to make it, the whole of Liberator Phase 1 and Phase 2 East can easily be included in the RBL at a level that I3E determines is wise enough to secure their funding.
Each type of reserves carries varying percentage levels to its NPV10. What I3E needs to do is adjust their development plan as little as possible to ensure they meet the minimum criteria they require.
To be clear. There is documentation/evidence out there that states that ALL reserves across ALL fields owned by I3E, would be included in the RBL calculation, be it on a sliding scale.
That means Serenity too. Tain itends tying back to the Bleoheim FPSO just like Liberator Phase 1. So a revised development plan (if necessary) could even include Serenity but even if that isn't necessary the RBL would take the reserves there into allowance.
We must mot forget we are talking about 2 assets that are no more than 10km apart and only 15km or so away from a readily available FPSO. Far longer and more involved tie backs exist out there than what I3E is planning and that will have a large influence on things.