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.
Interesting articles:
Armstrong Oil & Gas discovered (from the articles looks like in 2017) believed to be at least 500 million barrels - and a deal price of ~ US$3.1 per barrel of discovered resource. And that's with WTI in 2017 looking to have averaged only about $51/bbl.
https://www.hartenergy.com/exclusives/armstrong-selling-stake-largest-us-oil-discovery-decades-30487
https://www.oilsearch.com/__data/assets/pdf_file/0005/13676/171101-Strategic-acquisition-of-interests-in-the-Alaska-North-Slope.pdf
https://www.nsenergybusiness.com/projects/pikka-nanushuk-development-north-slope-alaska/
And, in comparison, PANR have, in just the Basin Floor Fan Complex, 1.41 billion barrels of Recoverable oil
And mkt cap currently ~ £195million (~US$273mil)
That I make as being just ~19.4cents/barrel
That’s nearly 16x less than the $3.1/bbl of the Armstrong/Oil Search deal.
16 x our current ~30p share price = £4.80 !!
And that’s just for our Basement Floor Fans
What about the Slope Fan, the Kurparuk, The Shelf Margin Deltaic and Alkaid?
And the price of oil is now higher than the deal price, in 2017, by about $18/bbl
Amazing!!
Truly Amazing!!
As always DYOR.
there are a few reasons for the difference in valuation:
1) Proven reserves's
2) Flow Test / Commerciality.
3) Environmental / Future Demand
Tonynorstrom1 - you're trying to be balanced and objective, which is good, but you've got the facts wrong I'm afraid.
1) Horseshoe/Pikka has no reserves, all contingent resources. Chiefly due to absence of Long Term Production Tests as lack of infrastructure means they're unable to facilitate the LTPT.
2) Where Pikka unquestionably is ahead on data collection is the number of wells drilled (12 verticals plus 7 laterals from memory). PANR could make an argument for 3 - 5 verticals. Fully accept there's a data differential there.
3) Commerciality. OSH are devoting a huge amount of energy and human resource at reducing the capex required to produce first oil. The company is guiding towards reasonable progress on that front but their cost per barrel and NPV per barrel in the ground look to be notably higher and lower respectively v's PANR's. How come? Lots of factors but the main factor by a country mile is PANR's proximity to the two major pieces of legacy infrastructure on the North Slope: TAPS and the Dalton Highway, both of which *literally* intersecting PANR's leases.
4) Environmental. The corridor stretching outwards for 2.5 miles in each direction from the Dalton is classed as historically disturbed land due to the presence of TAPS/Highway. Thus the environmental impact of the development of PANR's assets v's OSH's Pikka asset is far, far, far lower because Pikka is all virgin territory. ESG assessment will see PANR score many, many more plus points than OSH's Pikka due to the proximity of this vital legacy infrastructure. Luck or design by management (mostly luck IMHO) but it doesn't matter, net effect is the same in favour of PANR.
5) Demand. Think you're refering to political macro trends here. POO and the strip price (forward price curve) will be sole determinant on that front when PANR comes to sell the asset. The political stuff won't affect an asset sale in the next 1 - 5 years minimum, price will be main (only?) factor once commercial viability empirically established.
Trust that helps readers.
Scott,
Not everything you have stated is fact - some is supposition. Let me expand a little on what I stated previously:
1) PANR have no proven reserves. As you yourself have mentioned - Pikka has a lot more drilling data to "prove up" their resources which is very significant when it comes to selling assets. How long will it take PANR to acquire similar data at their current rate of progress?
2) Flow Test / Commerciality. I'm not sure how many flow tests that PIKKA have done, but I suspect from your reference to "long term flow tests" that they have done at least a couple. However, my point was that PANR have done one flow test which in terms of proving commerciality was a failure. Agreed that there were issues with the type of reservoir (oil wet) that may be overcome in future, but as it stands now - the results are disappointing.
3) Environmental / Demand Issues will impact all Oil Companies one way or another in the coming years. Being on State Land v Federal provides no guarantees. However, projects that are more advanced have less risk in general than those that are still years away from production. I think that this is just common sense. Development on Pikka has already started and is reportedly only a year or two away from producing 30,000 bopd. Where is PANR?
"The political stuff won't affect an asset sale in the next 1 - 5 years minimum" - This clearly is very questionable - politics and the green agenda can move very quickly and is unlikely to get any easier in the future - just look at the keystone pipeline, construction 95% complete, over $8B spent and cancelled overnight with a stroke of Joe Bidens pen.
I hold a few shares in PANR and favour it over 88E which I owned previously but I think there is considerable risk here and there are probably some better risk / reward plays out there - one of them is just about to start paying a dividend !
I wish all shareholders particularly long term holders good luck!
Tony, the Kuparuk was PANR’s second flow test. Alkaid was successfully flow tested, all be it over a small interval and duration. It looks like the Alkaid sands tested correlate to the SMD.
Get your points but just wanted to highlight this.
Surely the other difference is funding. PANR need to raise a lot of money to move to the next step or they are going to farmout. More likely both. So until those are resolved satisfactorily, the value will not out. A fund raise of $50m would dilute a lot but allow them to drill again next winter. But then what? Same story, and the longer it goes on the less value for shareholders.
We do have a lot potential reward here, i would not argue with your figures there. But if it is spread over a few billion shares we haven't made any money. I do agree the risk / reward is still there which is why I still hold. But until they get something to flow, they effectively have nothing of value.
Roll on summer testing at Alkaid.
JL
To me a few billions seems excessive. Even if we were to to dilute 100% from current market cap. That would give us >$200M and fund 10 drills. You would be looking at 1.4Billion shares. That’s the worse deal possible ignoring share price increases after hopefully successful drills and also ignoring revenue from any wells drilled from the Dalton. Each well could bring in ~$30M per year.
Also I believe Jay when he states the industry will value us more than the market. There a 10-15% farmout could get us the money we need for 2 drills and the flow test.
If things go well, and understand it’s a bigger if for some, we could be looking at 3B barrels and a take out price well in excess of $5B and likely closer to $10B.
Rabito,
I stand corrected - I forgot about Alkaid. However there are issues with Alkaid also - why has it not been sold yet ?
what issues are those precisely?
... and why on God's earth would we be selling Greater Alkaid, after its successful flow test and the data from Talitha#A ?
Alaric,
Have you not being paying attention to what the CEO has been saying ? I recall him saying that there are much better Companies our there (I think he means with cash, resources and expertise) at putting fields into production and drilling wells. PANR are still looking for funds to continue testing !
you mean a farm out? sure yes of course they're looking at deals to fund further exploration. but you're talking of selling Alkaid ? and there being issues with that? what are you talking about exactly?
correction : 'exploration' should read 'appraisal and production'
18.15 - Its the middle of June already which I'd classify as summer....do we have the funding and schedule for summer testing? Does anyone consider time to be running out for that this year?
The PANR finance chap in the Talitha webcast says that the summer drill realistically will be an autumn drill.
09.48 - I'm aware what Justin said. I just think it'll be a push from a timing and funding perspective to run this in the autumn. They are still actively seeking and FO partner for Talitha revisit (testing of the other zones) plus running the further analysis on Talitha / seismic re calibrations and I'd very much hope they are putting some effort into working with their brokers to assist Farallon's exit as the board should hopefully be more reflective of the depression that the situation is having on the share price and the distortion in value for any positive underlying results they issue.
just to be clear about the permit to drill Alkaid from a pad this Summer, that effectively means it can be drilled all year round. because this is right by the haul road, access for rig and associated people and equipment is easy and quick. not much drilling like this going on in Alaska during Summer and Autumn so contracting a rig quickly should not be problematic
tonynorstrom1 – replying to your post on Friday @ 10.15am.
1) Nope, my post prior to yours was all pretty much “fact”.
2) Serious question. With your surname of “norstrom”, English may not be your mother tongue. Is English your primary language? If English is indeed your mother tongue then perhaps you’re just ignorant or genuinely rude? I corrected you about OSH not having any reserves, rather contingent resources at Pikka/Horseshoe. Not a word of acknowledgement, not an apology, not a withdrawal of your previous assertion. Is there any other explanation for this omission other than non-comprehension of written English, ignorance or rudeness? Maybe you’re just a simple troll? I’m being deadly serious here.....I do not know any market professional who would not immediately acknowledge a factual correction, no matter what a p**** they were in the office. Kindly try to do better.
3) Time to equivalent data capture? Hmmmm, my *personal* opinion is 4 or 5 more drills. I am, however, very confident that PANR will have reserves years (4 years minimum IMHO) before OSH/Repsol at Pikka.
4) I have a factual answer for you on the LTPTs at Pikka. Zero. Zero is the answer to your question about LTPTs at Pikka. Due to the location and lack of infrastructure, flow tests thus far at Pikka have been measured in hours and minutes rather than days and hours. Educate yourself, Tony.
5) PANR has successfully flow-tested Alkaid, and sadly achieved only a partial result at Talitha (Kuparuk). You conveniently forget the Alkaid flow test in March/April 2019. Why is that? Ignorance of the facts or wilful omission? Being unaware of the facts of an investment case is nothing to be embarrassed about because a curious mind and serious questioning of fellow shareholders will soon address that deficiency. What is completely unacceptable and pathetic is misinforming the other readers of a public forum with no regard to uncovering the facts. The facts could not give two hoots about your opinions, Tony, the facts are the facts.
(cont'd)
6) State v Federal land. You’re factually wrong again because it *does* bring certain specific guarantees in law. At the core of the US Constitution is the concept of states rights. Unless you believe the rule of law is under threat in the US then the SoA will remain the landowner, regulator and royalty beneficiary of any and all oil production from PANR’s acreage. The US Federal govt cannot legislate on matters reserved for the states, with land ownership being one of those key constitutionally guaranteed rights. Constitutional amendment? Aye, maybe. The last one attempted was in the 1920’s and, from memory, only just over 30 states have signed up to it as of this year. If you are to speak publicly with such certainty on a subject, it surely behoves you to do a minimum amount of background research.
7) You need to re-read your sources on first production at Pikka. You state “30k bopd only a year or two away”. This is complete poppy****. Kindly go to the OSH website and access the latest corporate presentation which updates shareholders on timeframes to first oil in Alaska. Here’s a genuine challenge for you, Tony. Show the readers you’re a gentleman with some honour and that you’ve learnt a lesson about guessing/opinion v’s facts. Come back on here, withdraw your original statement, correct it, admit you erred and apologise to the readers of your post.
8) If, and I repeat if, a production well is drilled at Alkaid in the Summer/Autumn then the oil produced will be trucked daily to Deadhorse and sold into TAPS at Pump Station No 1. PANR’s first oil production will therefore be years ahead of OSH/Repsol’s at Pikka.
9) I note your Keystone comparison. The pipeline was to run through Federal and/or Native American land - fact. The Democrats ran on an explicit “cancel Keystone” election pledge – fact. The Canadian PM accepted the cancellation on that basis with no legal challenge. PANR’s acreage is located on SoA land, TAPS is located on SoA land, the Dalton Highway is located on SoA land. Now what’s your point?
10) Politics and the green agenda can indeed move swiftly, and I hope they do as it pertains to global carbon emissions. Developing low cost acreage adjacent to legacy infrastructure in a US state which relies on natural resources for >90% of state revenue and a stable legal system in a country where both main political parties are determined to remain energy independent is exactly where I want to be investing. If politics changes so swiftly in the next 1 – 5 years then the most immediate impact will, logically, immediately be reflected in the global POO. My analysis suggests Alaskan oil will be a net beneficiary of any such unexpectedly rapid move in politics. If I’m wrong, the POO will, thankfully, give me good warning.
11) I note your comments on risk. That is your personal call and no business of mine.
Tony – jumping in on your chat with Alaric on Saturday @ 21.08
I am now going to declare an opinion. You, tonynorstrom1, are an exceptionally rude man and I promise you that your understanding of even the basic foundations of the PANR investment case is sub-par. My eyes nearly popped out of my head when you replied to Alaric, “Have you not being paying attention to what the CEO has been saying?”
In that one sentence you have set off a blaring “Warning, Warning!!” klaxon to all readers with even a passing knowledge of PANR and/or E&P listed companies. Why TF would PANR have wanted to sell off Alkaid (NB your choice of past tense)? What on earth are you on about? It is *you*, tonynorstrum1, who hasn’t been listening to management. Did your ears have a sudden malfunction when management has been guiding on the steps required to drill a lateral production well by the roadside at Alkaid and to then truck the oil approx 15 miles north to Deadhorse? And you honestly thought it was an appropriate thing to do to ridicule Alaric for not listening to the CEO??? That is an imbecilic point you tried to make and you fell flat on your face. [Plus we now know there is the possibility the Kuparuk, SMD and SFS are *also* present at various locations within the Alkaid Unit. Why TF would PANR wish to sell Alkaid without first establishing the quantum of upgrade to TRR never mind the LKA approved contingent resource? Madness, complete madness.]
Tony – if, and it is still an if, PANR/eSeis’ geological model is correct then, quite literally, hundreds of wells will indeed be required to fully exploit the acreage. You are quite correct that PANR is *highly unlikely* to be the main operator when such development occurs – totally agree with you there. But that does *not* mean that E&P companies the world over don’t attempt to move as far up the value curve as they possibly can before securing an exit for shareholders. You say you’re an 88E shareholder, or you were a shareholder. In that case you’ll have heard Dave Wall use the following phrase repeatedly: “cream the curve”. It’s no different for PANR. If you were happy with DW “creaming the curve” then why not PANR? Your inconsistency makes no sense whatsoever.
Yes, PANR requires funding for its next operational activity. The webinar dated 20/4/21 was quite explicit on that matter. How else do E&P companies the world over pay for their drilling activities? Have you, tonynorstrum1, discovered the mystical money tree??? My personal opinion is that the likelihood of proceeding with a farm out as the source of those funds, as opposed to an equity raise, has increased markedly due in no small part to the equity market’s unwillingness/inability to properly value PANR’s equity. For me, that would be a shame because I would prefer another 12 months of 100% asset ownership but it is what it is.
(cont'd from post below)
Tony – you may feel I’m being unnecessarily cruel to you. In truth, I couldn’t give a monkey. I’d far rather all readers of public forums read and go on to assess the *facts* of an investment case prior to making, or not making, an investment than worry for one millisecond about some poster who flat out refuses to be corrected on his errors thus displaying no regard whatsoever for the consumers of his content. The selfishness of this attitude astounds me. Do better, Tony, or just quit posting here because, and please believe this in the serious manner in which it’s written, you are providing zero value add here. You *think* you are, I’ll grant you, but you’re not.
feel free to jump in anytime Scot! as you saw, tonynorstrom failed to respond further to my challenge of his remarks about selling Alkaid. in my book that's a technical retraction. not responding to specific questions seems to be an accepted behaviour amongst some on these boards, particularly those who initiate (bad) points subsequently shown to be nonsense
13.42 - in law 'no comment' does not mean 'guilty'...I think thats what you're implying...when expressed like this you may be able to see thats pretty ridiculous...
well Draig i wasn't exactly envisaging a criminal court as the context for my observations but, as far as you go, indeed 'no comment' doesn't per se admit guilt in that context. you fail to mention however those situations when courts will allow an adverse inference to be drawn from a defendant's silence. these tend to be where incontrovertible evidence of the defendant's guilt has already been adduced. thankfully here we are just a blogging board, so people can draw all the adverse inferences they want from a troll or whomever failing to respond sensibly to specific questions. when expressed like this, you may be able to see how ridiculous the barrack room can look from time to time.