@Fevertreeman Firstly, excellent post and I thank you for sharing.
With regards to your 2nd post, whilst appreciating your point I would question AMER ability to control the process of the Sol-1 announcement as it is ONGC who will announce the results, although I appreciate that the situation isn't entirely black and white and will depend on who is interested in what.
Secondly, why do you feel that AMER will want to see "the whites of any formal offerees eyes" when to date
a) there is no formal offer or indeed any guarantee that one will come and said process will take up to another 28 days ;
b) AMER have already turned down the initial offer, declared there are other offers, and commenced a strategic review to establish the best way to maximise the value of the business.
With that in mind why would AMER wish to try to hold back well results, which if commercial only strengthen their position further.
I would like to say that I ask this openly with a view to bettering all of our understanding better and would take the opportunity to thank all contributors for what is becoming a very interesting and informative debate here.
Whilst my own current estimated price lies somewhat below that of a good number of contributors here (23-25p), I do think it has the potential to be improved by AMER achieving a break up of the parts of the business and sale to those parties that know the most about them. i.e. their current partners.
Whatever is happening with the 2nd rig or indeed the results of Sol-1, ONGC have the greatest knowledge of that block and the results gained to date. Therefore, they for me must be the very best chance for achieving the highest possible price for that particular asset, but I do stress 'possible price.'
The same should apply to the Putamayo assets and OXY who it may just turn out have been reviewing the assets and their ability to be exploited (indigenous population disagreements etc) and nothing else these last 6 months or so. They are not as far down the line as ONGC but they have clearly stated they took on those 4 blocks because of the OBA. So again an asset sale led by AMER may just bring the greatest success if they are able to achieve it or indeed have the options at their disposal to see it through. In the meantime, I remain cautious and maintain my estimate because as is usually the case with these things, they never normally fetch as much as us PIs would expect or indeed hope for.
@Jaggers I tend to agree with you on SOL being commercial. According to the Indico rig tender the drill and test phase for Sol-1 was set at 32 days and the completion period set at 24 days.
Drill spud 11th May and result was announced on 17th June = 37 days
Current short term test period is running at 36 days.
In comparison Indico 1 drill result was announced on 10th Dec and the results of the short term test were released 23 days later on 2nd Jan.
Sol-1 test is therefore running at more than 50% longer than Indico-1. The question is why? and how long can ONGC hold out before releasing the figures.
In my view one doesn't test a dry well for 36 days.
Is it in ONGCs interests to delay the result? Who knows as we don't have enough information to judge it. What we do know is that it isn't in the AMER BODs interests to delay the result and whilst they are supposed to wait for the operator to make the first move, that demonstrated through Indico-1 that they can make an announcement ahead of ONGC be it against rumored press leaks, which at the time I was unable to locate.
All that aside, Sol-1 indeed looks commercial, question is how good is it and what does it mean for the entire fairway on that particular part of the block.
Good morning everyone,
If the author of this tweet is to be believed then we have a very significant development in the VRFB sector, assisted by a sustained period of lower vanadium prices.
My own thoughts in response point towards a logic that says that the vanadium must have already have been secured for this phase. It may well be that the financing actually pays for the vanadium but for me given the problems that this project is reported to have had in securing vanadium at prices that were tolerable to the project, I struggle to see the team continuing to entertain a supply risk of this potential magnitude when the project is already started.
That aside, such developments are what can happen when vanadium is priced at a level that is for the greater good. As investors we would all like to see higher vanadium prices and greater front end profits for BMN. That in turn would deliver a healthy return for a great many contributors here. However, it isn't the real prize. For BMN that comes from a truly successful VRFB sector and that sector needs pricing and supply support.
So long as BMN has the resources to fulfill its declared plans and go on to produce the stated 8,400 mtV production target, whilst delivering a scalable electrolyte production, then current pricing really does not truly matter. I have stated my feelings previously on this BB, that this year is all about the preparation an that it is in 2020 that this all really starts to kick off and I stand by that.
That preparation is being assisted by those lower vanadium prices because they are helping support projects like the one in Dalian and that in turn helps strengthen the businesses that are involved in them, driving the expansion and penetration of the industry.
It can be difficult to watch at times as V prices seemingly don't want to turn but it is for me important to remember and keep repeating that these lower prices actually are assisting the long term success of this investment and its ability to reach the truly dizzy heights it is capable of.
@Ophidian Without wishing to detract away from I3E by talking about other shares on its BB, I would say that your plan certainly has merit. I invested heavily in BCN at sub 20p so de-risked considerably once it hit the high 40s.
I am still invested and remain very supportive of the business going forward. The SP is in a very healthy looking uptrend and looks set for a good run in the 2nd half of the year as more developments are realised on both projects.
@Ophidian Yes good to see you here too. I very much like the set up here and whilst the numbers do look a little heady, they are very much within range.
The HUR valuation of circa £373m upon completion of a successful pilot well (and that is 'all' that it is with I3E and the L2 well) equates to a near £2.50 share equivalent pricing.
Things can still go wrong of course but then the same can be said of any share we back in this market. The risk reward is highly desirable such that the current pricing has little chance of holding once this all starts gearing up in earnest.
I wish you well with your investment.
Duly noted Ophidian and thank you for sharing. For me the warrants whilst potentially representing a sizeable percentage of the total shares in issue (circa 60%) hold very little sway here once the drill programme begins in earnest.
I have previously employed HUR as an example of what is likely to happen.
HUR spud a very similar pilot well on the Lancaster field in July 2016 having diluted their shareholders to the tune of 55% in the run up to that drill.
The raise by HUR required a general meeting, which took place on 9th May.
On the day immediately prior to the fund raise announcement (not success of through said GM) the shares were trading at 10.25p. At that point there were around 634m shares in issue, which equated to £65m.
By the end of the day's trading on 10th May, the date the new shares entered the market, the SP was up to 13.25p and the valuation against the revised 981.4m shares in issue was £130m. The equivalent like for like rise on 55% dilution would have created a valuation of circa £101m.
So even with the dilution, which did not create further cash inflows like the warrants will for I3E, the securing of fiance for the drill created an additional 30% of value.
Then came the spud of the pilot well on 6th July and a valuation of circa £160m (16p a share) and then the successful outcome on 9th Sept, which delivered a valuation of £373m (38p a share) on the day.
HUR carried out these operations in an environment where Brent was trading at $44 per barrel and declaring a $240m 1st phase field development.
I3E will highly likely drill in a $60-65 per barrel environment with circa $100m required to complete the phase 1 development.
The 2 fields aren't exactly the same but there is more than enough in the oil price and development costs to offset any perceived resource differences between the 2 enterprises.
The key for me is that with I3E we are talking 'potentially' 56% dilution warrants that raise £27m in cash receipts against a 55% dilution for HUR, which was front end and there to be sold into any rise.
I see very little good reasoning why I3E won't follow the same path with or without the warrants as a headwind. One could easily justify the same valuation at Liberator pilot well spud, which would place I3E shares at over £1 a share on a fully diluted basis and would still be ignoring the then plus £30m they would have in the bank, which is circa double what HUR had when they spud Lancaster.
For me this is all about when not if the surge will come. The prize is simply too big and too attainable for it not to happen.
Looking at the differences between the Hargreave Hale and the Hermes Investment Management RNSs, I note the following under items 1F of the Hargreaves update ;
(f) In addition to the company in 1(c) above, is the discloser making disclosures in respect of any other party to the offer? If it is a cash offer or possible cash offer, state N/A
N/A is stated.
Does this mean that Hargreaves are acquiring stock for a potential cash buyer and if so, given the M&P offer is part cash part shares, does that mean it is someone else?
@JTD From what we know thus far I believe it is a little early to be considering ownership in an Indonesian company. The RNS from M&P is clear that they plan to float on a UK exchange. Its not a given but there is no reason at this stage to believe otherwise.
You make a very good point about the operational update. What the last 2 RNS from AMER demonstrate is a company that is dealing with an unsolicited offer and that appears to want to see greater value reached from an eventual sale. If that is the case then we have a BOD that will want to demonstrate why that is the case. There is no better place to do that than in reporting progress against the assets.
If we were witnessing a BOD that was more complicit with a takeover as I felt was the case with Ithaca, then the news flow would dry up and be aligned more with the needs of the acquirer than of the existing shareholders. If that is the case then that bodes very well for the fight ahead and the final price that will be seen.
An update on SOL-1 with a success and a move to Indico-2 would be most welcome indeed.
@ColonelDrake Appreicate your point but won't M&P have to declare every 1% that they own. Right now they haven't declared anything, which if their strategy was as you say, then surely they would have carried out in the weeks leading up to this point when shares were available for 12p.
Perhaps I am being too simplistic or indeed a tad naive but I don't see share ownership by an interested party being covered up.
Yes F1 game.
Over the weekend I attempted to put my conservative head on and achieve a base case value that considered the fact that an acquirer would want to achieve a healthy advantage from the assets.
Still there are some very clear valuations that can certainly be used as a base case and so the situation as I saw it was this ;
1. Cash (today) $50m.
2. OXY 50% in 4 blocks sold for $93m . Other 50% includes operatorship and a free carry on seismic, infrastructure and 5 drills. So for me there has to be minimum 20% more value in that = $110m.
3. Put 8 50% sold for $19m. Other 50% comes with operatorship. So again I would be thinking $25m.
So I am at $185m even without Platanillo and CP0-5, which hold all of the reserves.
As of March 2019 AMER held 25.6m in 2P reserves. Even at a conservative $7 pr barrel that comes out at $175m and 17.5m of those barrels sit within a block that has a pipeline that can carry those barrels all the way to the Esmeraldas Port for as little as $5 a barrel.
When I also consider that it is very well known that Indico 2 and 3 will likely open up considerably more reserves than have currently been booked against CP0-5, then the $7 a barrel looks bottom end to me even with a discount.
But even ignoring that and the OBA pipeline itself, and considering the fact this is not a sale that needs to happen, then the above figure should be a minimum target at $360m. That equates to £288m or 23.7p a share.
Having witnessed how the Ithaca Energy take out unfolded, I am prepared to be underwhelmed as the actual take out price seems to always come in under the expectation (unless you are Anardarko of course), but I feel there is more than enough discount and opportunity in my conservative approach to ensure that the BOD avoids anything below that mark.
It is however just my opinion as a shareholder and it is conservative in its nature for reasons I have already said.
I also take it as a positive that the actual bidder is not ONGC, OXY or GTE. That was perhaps signaled by the fact that AMER commenced the strategic review and invited all interested parties to declare their interests. That in turn indicates strongly what AMER think about the offer they have received and why they would consider breaking up the assets in order to realise a more substantial combined sale price.
It also looks very much like M&P know their animal and are looking to wrap this up asap and avoid any substantial gaisns that Indico 2 and 3 would bring.
Morning JTD. Yes I spent much of the weekend mulling over the valuation for the company as I saw it and whilst I struggle to see a value being realised above 30p, I certainly see 25p as attainable. This is particularly true when I consider that the current interested party plus the other known potential buyers, hold little or no shares in the company at present.
I suspect that today's offer is designed to halt the speculation in the share price and put a cap on its growth until such time that M&P have had time to suss out the larger shareholders more thoroughly. I am with you that 17p just does not fly even when considering substantial discounts etc.
At that price and with circa $50m in the bank right now, I simply cannot see the likes of OXY and ONGC allowing an outside interest to pick up all of AMER physical assets for circa $200m. Its far too cheap.
Most definitely it is a for sale sign and in my view this is now purely about the price that will be achieved. I see it as a positive that the company is looking to conduct a review rather than simply entertain the first offer for the entire business. It is perhaps a reflection of the level of interest and likely how far that offer falls short of their expectations.
Today's announcement if nothing else has put a much needed support under the SP and improved their bargaining position with it.
Unfortunately I don't believe we have any chance of seeing out the next 12 months. I would think we are talking closer to 2-3 months at best.
Depending upon who exactly is actually demonstrating an interest in AMER, the upcoming drill at Indico-2 actually should put some pressure on them to define their true offers and close the deal.
Indico-2 has the ability to at least double the reserves currently booked against the first drill.
Remember this from 22nd Jan RNS
"the 1P and 2P volumes assume conservative production parameters and also assumes that at Indico the Oil Water Contact ("OWC") of the structure exactly coincides with the Lowest Known Oil ("LKO") defined by logs and in-situ sampling and pressure tests in Indico-1X."
"The 3P number is similarly conservative, and assumes that the OWC is located approximately 40 feet deeper than the LKO already established in the well, i.e. an additional 13.6% of effective oil column. "
If the column extends much deeper then the reserves will be considerably more than those currently booked thus driving the value of the business much higher.
The Sol-1 never ending short term test may also deliver (with results surely imminent) production and reserves and then its on to Indico-2. Results should be around 2.5 months. That's not a long time in a takover especially if there is more than one party interested, and the company is certainly indicating that strongly.
For those that have done their homework here over the last months/years and actually understand the assets and strategic worth that AMER is sitting on, there could be some very good opportunity here once all this noise dies down.
There is a lot of commentary flying about and much of it isn't demonstrating itself to be fully aware of what base value should be. I suspect the SP will fluctuate greatly and I will be looking to add when the dips come.
Given the fact we don't yet know how big an offer the company has or indeed possibly will receive, it is clear that there will be many opinions on this and an awful lot of games played as investors/traders smell a profit.
Having sat through a long period of inactivity in the SP here waiting for the potential to show itself, I feel that now that potentially is at least in part showing signs of realising itself, the very best thing I can do is sit juts as still as this plays out.
That there will be a sale I am now very certain on given there is an offer out there already. Now it is about waiting on the details and ignoring the noise that such an event is bound to create.