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"This is why CB has been so quiet IMO. Nothing at RC, nothing at Ascot, nothing at Footrot. Expect market to punish severely. Very frustrating." - is why there is so much volatility here. Rather than reading about the purpose of the drill, some people just leap to the fact that there isn't anything there. We have mineralisation and we are now been able to colour in some of the lines around what the pit model could look like. All of this helps to give confidence that there is long term value in the resource.
Anybody who has been involved with AIM for any amount of time will know the familar site of an SP sliding for what appears to be no reason - it is part and parcel of AIM. Also, anybody who has been involved with HUR for any length of time will know that the SP here has never really been tied to the PoO - we have seen them shooting in opposite directions for no reason.
What we think we know is that we have a producing well, net free cash to pay off debt and a well life that should give us a cash balance well in advanced of where we are today in terms of SP. There are a lot of things we don't know in terms of what is going on behind the scenes and I appreciate that causes jitters but the fundamentals have not significantly shifted. This is a slide that will be seen all across AIM.
The only thing that really bothers me is that in a lot of other shares that I have been involved in, when a slide like this happens it can often be arrested by the BoD purchasing some shares. It is not always a significant sum, but it reassures that markets that there is confidence in the share and can halt or turn sentiment. The fact that the HUR BoD are not doing that I find really frustrating.
FFS - I am glad that between the two of you we have now managed to hit Godwin's. Pat on the back, move on.
@RetiredBanker. At this stage anything is possible, but I just don't get the sense that a raise is coming. I know that PIs are in somewhat of a minority but it would just be extraordinary given the cash position of the business to go down the route of forcing dilution. Never so never, but I think it would be a stretch. It is just as likely that the SP has been walked down because there are people in the know who want in before a takeover is tabled. I am not sold on the fact that either of these things are happening in truth.....but will admit that I am struggling to find a reason for why there has been the downward pressure.
To be honest I think there are a number of reasons why the share price is down but the windfall tax feels like it has cut a little deeper here than in other plays. For what it is worth, I don't think that the BoD have been negligent in this regard or with their current lack of a forward plan. It wasn't long ago that the company was under threat from the bond holders - and I would argue that the BoD (and CA) would want to put that behind them by clearing the debt and having some cash in the bank to generate a little bit of stability. This would have afforded the company the best opportunity to then take a wider view of future plans.
The windfall tax has been reactionary, but the BoD can't be blamed for that and certainly can't be blamed for not responding hastily. I don't think anybody here would like to see us to commit to a reinvestment programme that was more risky / costly than the actual windfall tax itself. It would be nice to have a period of stability, followed by a measured approach to helping creating value for shareholders.
I think that lack of immediate plan has triggered a bit of a reaction because of the potential reduced cash balance for each uplift (ignoring the current price of oil), which in turn triggers worries about us only producing from a single well. Nerves, AIM instability and market sentiment.
I don't post here very often but have been in and out of Sound for quite some time now. The issue here I don't think is to do with the fundraise itself.....we were all aware that some funding would be needed to carry us over either for Phase 2 (as has been suggested) or simply to keep the lights on.
I think the bigger issue is the manner in which this has been done and sadly, with all of the issues around JP and what feels like absolutely dishonesty, it was always going to cause a problem. It is a shame that the BoD had not been more considered in their approach or how they managed comms. For many, we know funding was needed but it felt like this would perhaps not result in dilution from the clear messages coming from the BoD - the fact that isn't the case feels Parsonsesque. The fact that the placing was at a 20%-25% discount and has been subscribed to by the BoD feels like another land grab on the company - again in a Parsonsesque way. The fact the communication and Q&A felt fairly positive in places to then be turned around into this - against Parsonsesque.
Whilst I personally believe the BoD is better equiped to deal with monetising the assets, and have a little more faith that we will get somewhere with this over time, I would have hoped that the BoD would have reflected on the history of the company and the relationship between the BoD and shareholders and 'managed' the situation better.
Haven’t posted for a while, still holding some SOU but more in hope than anything else.
Not rushing to a defence here but there is a reasonable statement made by Trellis with regards to TE-5. If we argue that the volumes are there, there has to be a question as to what has caused a lack of interest in terms of a buyer / partner in the company (except for a UK Plc which seems to not have enough money to follow through). Yes, it is a case of guessing but it could be that there is a problem with the volumes, or a problem with getting a pipeline in place, or a concern about extraction, or because SOU has been so badly managed that everybody else is wary of getting involved, or the Moroccan government / other party are just waiting for the assets to become even more distressed.
We don’t know - but at this stage all we really have is speculation. The conduct of the BoD has been unacceptable, I think we can all agree on that. And the marketing of the company appears to be another example of PIs been left with more questions than answers.
I mentioned in a previous thread conversation about TE5 and what it could be worth to the SP. If the small target gets hit and the GOIP is accurate, with a 47.5% share and 50% recovery rate I think the TE10 small pocket would be worth around 4p.
Hugely disappointed that the COS has been reduced to 14%, especially given the FSC was very recently and only took the COS down for 30% to 25%. Can see why the SP is getting hammered today.
I am not blindly invested here, I think there is still value and that the current SP is more of a reflection of sentiment and mistrust rather than actual fundamentals. BUT I do think that the SOU board need to consider coming out and explaining why the COS has dropped so dramatically as it is suggestive that there has been some fundamental mis-understanding of what we know about the geology. I accept the groundworks had been completed at TE10 site but with such a reduction in COS plus the removal of the Paleo target - wouldn't it have made sense to stand the rig down and push on with TE11 or look for an alternative site? Rather than just seriously poking a hole in the ground and winging it?
I suspect there will be a lot of calls and emails hitting the SOU offices tomorrow as a result of this exchange - and rightly so. The SOU team need to provide clarity, they have had direct questions posed and without speculating on share price they can confirm if the calculation is correct. Only time will tell how much this discredits the SOU board.
Given what we know about TE5 then there is an argument that we are still undervalued at this price (obviously does nothing for those who bought in much higher).
With regards to seismic and drills, we still have another 2 chances to confirm our interpretation of the data we have analysed so far and potentially de-risk more of the wider area. Whether this happens or not is a very different question and I can see why trust and faith in the SOU team is at it's lowest possible level.
If we can prove it up and begin to edge closer to demonstrating 9TCF gas in-place, then even those who bought in at just under £1 could still turn a profit.
I know how much I am clutching at straws / looking for a silver lining here!
Given the revised calculation it would give us an SP of around 20p - 25p.
Just on valuation I think the truth is simply that we don't know and there are moving parts that will contribute to a final calculation. For those following the discussion but uncertain about what it all means my summary (rightly or wrongly is this):
- Nobody is disputing the £1.50 per TCF figure - I think that we are all agreed that this is probably fair and accurate but could swing based on whether or not NAV10 is applied and what gas price we achieve. Good ballpark figure though.
- What is not conclusive is whether the £1.50 per TCF applies to recoverable gas or Sou's share of that recoverable gas. So taking 0.65TCF in place at TE5. If we assume a 50% recovery then that would leave us 0.325TCF recoverable. That would then give us one of the following:
0.325 * 1.50 = £0.49
(0.325 * 1.50) * 0.475 = £0.23
I don't know which is right and can see both interpretations. I will admin that my initial understanding was that the actual value per TCF was actually over £3 of which SOU would receive 47.5% - so my initial feeling was that the SP should be underpinned closer to the 49p mark.
However I can certainly see from the communications how I may have got this wrong and the team at SOU have not exactly been forthcoming in terms of correcting that and have perhaps allowed the ambiguity to remain.
Time will tell who is right, but wither way I would expect the SP to be sitting above 20p given the above.
WWW - unless I missed something there has been no indication that TE5 cannot be sold in isolation. We are talking about 0.65TCF of gas here, the value of which far outweighs the cost of adding the infrastructure. Do you have other reasons to suspect that it would not be possible to sell SOU based on TE5 alone?
With regards to cash in hand after the drill compaign, I cannot speculate on what the burn rate is for BAU operations. But to suggest $12m will disappear quickly seems spurious at best. We could potentially burn quicker by re-entering existing wells, shooting additional 3D seismic or running deeper analysis on the data we have - but they are just some of the options available that would help derisk the wider project.
Not certain why you have such issue with Schlumberger - nobody is happy with TE8 and TE9. But if you want a strategic partner, surely you want one with a good record in the industry?
Just to address your points WhatWhatWhat:
0.65TCF is in all actuality worthless as it currently stands without GSA and the infrastructure. However, there is the commitment to put the infrastructure in place and a market for the gas. So whilst it is hard to ascribe value currently, potential purchasers of SOU will see the potential.
$30 million minus the cost of TE-9 takes us down to $24m. Another approx $14m for TE-10 and TE-11 would leave us with a positive cash balance of approx $8m - $10m. So still cash available should we choose to re-enter an existing drill site.
Suggesting Schlumberger are 'nothing classy' is quite frankly nonsense. What are you basing this on? The TE8 / TE9 dusters? The seismic? Just wondering how an organisations gets to grow to have a market cap of over 65b without been good at what they do.
Brian was under a lost of pressure yesterday and I have no doubt he has suffered some massively personal attacks over the past few days. Like many, I am not entirely satisfied with the responses given as the implication was that the seismic is not of sufficient quality or we have rushed analysis - neither are ideal. But they can take the data learned from TE9 and re-visit their analysis of the seismic and hopefully improve upon their understanding of what it is telling us. In my opinion, the value of the seismic is in the wider area - not specifically TE10 and TE11. If we reanalyse, further our understanding, and TE10 and TE11 confirm that analysis then that can derisk the wider license. It is then that the true value of the seismic comes into play.
Hi Seaton,
I have tried to avoid strong speculation on any of the points. I think the fact that they continued to TD for both primary and secondary targets, and are running wire line, can certainly be interpreted as a positive. But this could be for a number of reasons and you could argue it may be done to further understanding of the geology rather than because of the presence of hydrocarbons.
My point is very much that there has been no news that has come out which would be highly suggestive of failure -but that lack of a 'gas column' / 'gas show' RNS seems to be applying downward pressure on the SP because it is creating speculation. That speculation is causing nervousness and increasing that downward pressure.
My opinion is very much that when you look at the drilling itself and the process they are following - everything is been reported on as initially outlined. They are meeting the expectations.
Hi All,
I am a long term reader of the message board (as well as others) but have never posted, never felt a need. I am a holder here and like many have watched in some dismay as I have seen the SP drop so dramatically on what is seemingly no change to our current position. For what it is worth - I intend to stick it out, but understand why people will sell out and cut their loses given the recent decline.
In my opinion, it is easy to spin the current state of play in either way depending on your objective but for those who are invested I can understand how any negative perception can be amplified causing the domino effect of speeding up the SP decline.
1) Limited detail in yesterdays RNS. On the positive side, this is what we should expect given JP previous comments - we would have RNS based on casing points and TD, which is in keeping with a tighter approach to releasing news on the back of perhaps some hype previously. On the negative side, there is not as much information as we have previously received which could be suggestive of failure and that been withheld as long as possible. Also no mention of the liner been set in an RNS. My interpretation - given the SP as it currently stands, what is to be gained from withholding the news of failure? We are already in decline based on speculation yet the progress was as expected.
2) Drilling 100m short of TD. The positive is that we reached the primary and secondary targets, on schedule without issue - exactly as expected. The fact that the TAGI was primary yet continued on to secondary Paleo can be viewed as a positive, I am not suggesting that this means a gas show as we could have continued for research purposes. The negative is that we were 100m short and there has been no reports of gas shows (see point 1). My interpretation - the drilling team have delivered as expected.
3) Wireline Logs. The positive is that we are running the logging process as planned and have not abandoned the well. As with point 2, this is not an indication of gas as could be done purely for research purposes. The negative - it takes time and we have to wait for the data (as with 1 and 2). My interpretation, they are running the logs as expected.
4) The hype. There has been a positive buzz around the license with some big values mentioned by the Sound team, as well as Sidi as another play. Schlumberger's continued involvement is supportive of a potentially high reward. The negative is that we fell short at Badile and Sidi has gone quiet. No movement on GSA is also frustrating. My interpretation - we have overpromised in the past and that has created negative sentiment and a general concern that the company cannot deliver. This is to be expected and when the SP starts to fall that sentiment is amplified. Not having the GSA means we cannot even underpin the SP based on TE5.
It is hard to watch but the current SP feels almost self fulfilling. A fall, followed by panic and continued