The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Mr P I am using a 10% discount rate - I have run 8% and 12% as well. $8 as the gas price and I have assumed that Energean will exercise their options. I have assumed a % for operating expenses and Capital Investment of $850m, $1bn and $1.3bn based on gas production volumes. There are quite a lot of variable so these are sense check numbers - I have also checked gas production volumes over 10 years to make sure that the volume produced is close to the various reserves estimates.
The metric that I like to focus on is the market cap which is currently about £100m with c1.1bn shares in issue. The max MC was £600m when we had c200m shares i.e £3/sh. My NPV10 calc for Chariots Working Interest based on 150mmscfd and $1Bn of development capital is c£550m or 50p/share - my NPV10 on 100/150/200 mmscfd are 32p/50p/67p. First Production H1 2027
This is not a list that you want companies that you invest in to be on ... he had Sound at a pound and it is less than a penny. I am struggling to recall a single winner, it is does bring in a few gullible investors but I am not sure that is a good thing.
HNY Surfit. I must admit that I was hoping for an acquisition but it didn't happen so we must continue to work through the complexity of the development of Anchois before we know if we will get a return on our investment (I am at 35p so a long way to go). My experience is that the AIM is a casino where you can lose almost everything or win big, BODs are overly optimistic - they always offer the best case scenario to attract and maintain interest. Cashflow is the only thing that will attract major investors. I am pleased that AP has a huge slice of the pie which gives him an incentive to keep things moving but I don't expect him to work miracles. Good luck to all Charioteers in 2024
Thanks Jimmy23 - I agree with your view on the potential for significant cashflow upside, my point is that the valuations are based on future cashflow (probably H1'26) so I don't expect that the current share price will be anything close to these analyst valuations (60-70p) until cash starts to flow. Historically many of these AIMs O&G companies had a considerable element of speculation on resources but those days are gone - at one point Chariot had a capital value of £600m £3/share- based on undrilled resource potential offshore Namibia.
Buyback is what you do with excess cash when you debt ratio is ok and dividends are covered. The money that Chariot get from the deal will be needed to fund the company through development i.e. it is not excess cash. Hopefully one day we will have no excess cash
Malcy is a paid summariser and a PR guy so I don't value his input much - I remember clearly that he attended all the booze ups for Sound Energy and treated James Parsons as a messiah ... more like a messer!!
My take is that the deal is reasonable with some cash at key junctures for Chariot and a carry to first gas so the diution should stop or slowdown. FID will be a defining moment and I expect Energean will get us there more quickly purely on the basis of wider bandwidth and their project experience. The sell down by whoever looks like a failed strategy i.e someone who expected a takeover. The values quoted by the analysts is about future cashflow rather than gas - we won't see cashflow until H1'26 at earliest but I expect some benefit from the de-risking and exploration/evaluation processes. Onshore we can hope to get enough money to pay G&A - the well costs look reasonable but the there may be some money and time in building some treatment facilities - the gas spec may be OK for industrial users - they should focus on Compressed Natural Gas CNG - I note in one of the graphics they show a CNG/LNG - forget LNG that will take more time than Anchois to produce revenue because it is a complicated process and they are relatively close to their markets. FYI volumetrically the ratio is 3:1 but there are plenty of CNG vehicles available. Best case scenario for me is that they don't need to dilute us, FID Q3'24, First Gas q2'26 (Revenue) - exploration is successful and we de-risk the multi TCFs and came sell the lot. Happy Xmas All ..!!
Hi Surfit - the european gas hub is a good source of info. You are correct about the maths it is a bit of a nightmare - volumes ft3 and m3 & scuffs then energy price €/ kWh and $/ft3 and even reference to Boe..!!
https://www.europeangashub.com/gas-price-volatility-eased-in-november.html
Surfit - I completely agree with these comments - de-risking is a continuous process through to first gas and probably beyond. The financing arrangements will have an impact on future cashflows. We are moving into a very significant programme of capital expenditure with a lot of schedule risk because of competition for resources a good partnering deal will make a huge difference.
Hi NewKOTB Anchois is gas so there won't be an FPSO - production won't be within 12 months because the lead time on critical items is 12-18mths and there is still detail engineering to be done. The big plus is that we have the EIA which something that potential partners would like to see prior to closing a deal.
Ianfer - In 2011 Paul Welch the then CEO talked about prospects of 16.6bn barrels in Chariots acreage and turning Namibia into Norway... 2 dusters killed it. There may have been a thimble of oil recovered..!! Anyway this was about the history of AIM for wild swing 25p to £3 on speculation and equally massive falls. Todays AIM is a lot less dramatic in both directions. I was lucky to make money on Char but unfortunately reinvested some of the gains so I have held and topped up from time to time - I liked the AP move and added at 2-5p so now feel comfortable. The uncertainty of exploration have been replaced by the complexity of development so an experienced partner is a good de-risk.
This is a fair comment whimax. In my experience of the speculative impact of RNSs on AIM died in 2012, due to numerous failures of small E&P companies e.g XEL, Encore etc In 2011 Char had a MarCap of c£600m c£3 with 200m shares, this was based on fantastical prediction of Bn of bbl of oil offshore Namibia (I think the well cost was >$50m) - those days are gone and cashflow is the main metric. Proper valuation will only come when we have significant production. This development will take probably 30 mths + from start of detailed design due to the high demand in the current market. I expect that capex has increased by 30-40% from the early estimates we willlearn more once the farmout is complete. I bought and sold from 25p upto £3 in the early days. I retained a core holding which I added to and have a core holding of 500k shares at 30p so after 13 years I am happy to exit and buy UK Gilts..
Plus it’s August which is a holiday month for many of our European friends. I would expect that any final terms of a farm out will need to be approved by an investment committee who will meet regularly. I look forward to the far out news.
The fund raise explains the tick down of the share price as the market got wind of the requirement for cash. The company still offers an upside for retail investors but we are left at the end of the queue when it comes to what is happening - this dilution will not impact management because in due course they will be given more generous options at an attractive price - this is small cap investing