Member Info for bigguboi

I won't comment on the short term but I suppose natgas supply to Europe could continue to have issues if war worries materialize in Ukraine. Europe may continue to drag its feet in regards to Nord Stream 2 agreements and Russia may reduce gas sales to Europe. If any contracts are on the verge of expiration Gazprom may choose not to renew them. This would be mutually unbeneficial to both Europe who needs the energy and Russia who needs the sales. Europe would have to get its energy from elsewhere, namely OPEC countries mostly as LNG (although this is already happening and gas prices have been at record numbers above $30/mmbtu) and Russia would need to increase their gas sales to other countries more.

I believe this would be good for Chariot in the long term. Morocco needs to supply at least 35Bcf annually thanks to Algeria cutting off the gas at the GME pipeline and currently they have to buy this 35Bcf or more as LNG in the international markets, have it shipped to Spain for regasification, and then to Morocco via GME. This is very expensive due to the associated processing & shipping costs, and any increase in European natgas prices would affect Moroccan energy prices as well.

Anchois would at the initial 50MMscf/d rate of production be able to sate about half of Moroccan natgas demand if all of the gas is sold to Morocco. The energy prices in this scenario would remain high and likely they'd be significantly higher too, meaning increased revenue from Anchois. Prices in Europe may be even higher than in Morocco so any gas not sold to Morocco would command a nice market premium. At 200MMscf/d at current Moroccan demand half of the gas produced would be able to supply all of Morocco and the other half could flow to Europe.

ICB888, I'm not sure if you're referring to me among some of the other more negative posters when you say you "question their agenda" so I'll make it clear that I am very long. I guess the point I've been trying to make is that even if there is substantial dilution the fair value of the shares will likely end up being multiples from these levels a few years from here. There are many ways the financing can go, CAPEX can easily exceed $300M or even $400M, Chariot's interest in the project can be reduced and there may be unpleasant surprises to shareholders along the way. This is normal. The point I am trying to make is to illustrate how robust the value proposition is even when accounting for headwinds and setbacks. I'm sure there will be many along the way and I'm sure many shareholders will let their emotions get the better of them at that time. By doing the math early on we can keep our heads cool and remain shareholders even when things seem bad in the short term.

I agree Jimmy, the value is clear. I'm factoring in a 'worst case' scenario and accounting for a portion of the financing being done as equity raise (for example 30~50% being equity, which is quite conservative imo). Even if the amount of shares outstanding doubles the fair value at initial rate of production should exceed 30p. Of course if they can manage to finance Anchois without any equity being issued and without farm-out then the fair value per share should exceed 60p in my estimation. I love to see this, the company is undervalued no matter how I look at it.

Realistically, assuming the company raises $100M in equity at £0.10/share and rest in debt to finance Anchois development, the amount of shares outstanding would increase to about 1,500,000,000. Assuming a base case of US$80M initial annual net return from Anchois the projected P/E at 8.4p right now would be about 2.14x. at 8x P/E the share price would in this situation be 31.4p. And again this is accounting for a 714M increase in (essentially double of current) shares outstanding.

In the short term we can go anywhere, way up or way down but in two to three years once Anchois starts producing -- and possibly exceeding expectations if natgas prices remain high and especially if a good portion of the production can be sold to Europe via the GME pipeline -- the share price should at least get closer to a reasonable projected P/E valuation. And after gas has started flowing we can expect Anchois to steadily increase production by 2-3x later down the line.

So just ask yourself, are you willing to wait for a few years to finally get a substantial rerate, are you confident in your investment decision even if it doesn't go anywhere in two or three years before the company starts generating cashflow, are you a forward-looking investor who sees the value Chariot could have?

The worries are all emotional.

The facts are these:
-There is well in excess of 1Tcf of recoverable natgas, possibly more than 4-5Tcf at Anchois and the surrounding Rissana License.
-Production will begin in 2-3 years and the company will start netting ~$80M or more annually, and multiples more down the line
-Chariot is going to participate in multiple solar projects around Africa
-Namibia & Brazil assets to be monetised
-Hydrogen project with additional upside

Sit tight and enjoy the ride. Added more today since I see technical support here, will add more again later if it keeps going down.
"The stock market is a device for transferring money from the impatient to the patient" -W. Buffet

Jimzi,

To answer your question, I'm usually interested in learning about the costs first as an investor. I've sorted through dozens and dozens of mining companies which have nice projects and all, but which aren't economical. While I have no doubt that Chariot & Eren's energy projects are economical I simply tend to try and establish the cost first. I'm new to energy projects so I'd like to learn about the CAPEX costs etc.

I think I understand the costs better now so I would like to ask you what you think the returns would be like. What can an investor expect the revenue to be, and how should it be measured in MWh?

Agreed Fernan. Some estimated average for most African nations would be helpful for us shareholders

And right as I type that Builder12 proves me utterly wrong with the link he shares. Typical, hahaha!

Okay I suppose $1M/MW is quite conservative enough for projects in Africa.

Hi Fernan,

Pardon me for not noticing the other link. If prices per kW in 2019 were on average about $1,200 I suppose in 2022 we could assume 50% higher costs (yes the inflation is that bad right now) or $1,800/kW. That may actually be too high of an estimate because we're building in Africa, but that's fine. It's good to be conservative. Let's say we can estimate $1.5~1.8M/MW as a rough assumption for CAPEX, in my opinion.

Good findings Fernan, although I have to point out the post was made in 2017. My (fairly limited) experience investing in the junior mining sector tells me that the CAPEX estimates made in 2017 will be significantly higher today in 2022 especially with the huge ramp up in inflation across the board and especially in commodity prices. We can double that CAPEX estimate and we might still be undershooting a little.

Jimmy,
Thank you for your reply. Hard to find anything like Chariot in the markets (if you do I'm all ears!)

Jimmy, I'm new so I'd like to ask: is it normal for offshore projects to have multi-Tcf gas or multi-mmbbl oil prospectivity?

I don't mind if the share price stays low for the next 2-3 years before production begins at Anchois. The numbers are there, Chariot will be bathing in cash. I'm happy I can take my time and buy shares slowly over time at low prices, I suggest others do the same.

General & Administrative. Basically it covers depreciation, management pay and running costs unrelated to operations. I'm possibly overshooting a little but it's better to be conservative in assumptions
https://www.investopedia.com/terms/g/general-and-administrative-expenses.asp

Or, say they start having a 20% dividend policy and multiply the numbers by 0.2 to get how much they would pay to shareholders, and divide that by the current market cap to get the current div yield. Using the "base" case the yield would be 15.45% and with the "bull" case we are talking about 35% dividend yield at the current market price... Significantly undervalued. Just need some patience until they will actually start producing.

First time posting. I feel like running some numbers on initial production at Anchois using different assumptions. Thank you for jimmy and others' good posts. Very educational for somebody like me who is new to oil/gas companies.

"Bear" case:
50% ownership, project initial CAPEX $500M, OPEX $30M/year ($15M/year net to Chariot), G&A $20M/year ($10M/year net), 3.5% royalty, interest payment 10% $50M/year ($25M/year net), $8/mmBTU, 50mmscf rate of production, tax 0%, 350 days of production/year

(50,000*$8*0.965*0.5*350) – $10M-$25M-$15M = $17,550,000/year net

"Base" case:
75% ownership, CAPEX $400M, OPEX $30M ($22.5M net), G&A $20M ($15M net), 3.5% royalty, 8% interest $32M ($24M net), $8/mmBTU, 70mmscf production, 350 days/year, 0% tax

(70,000*8*0.75*0.965*350) – $22.5M-$15M-$24M = $80,355,000M/year net

"Bull" case:
75% ownership, CAPEX $300M, OPEX $25M ($18.75M net), G&A $15M ($11.25M net), 3.5% royalty, 7% interest $21M ($15.75M net), $10/mmBTU for 50mmscf & $20/mmBTU for 20mmscf (selling 20mmscf to Europe, assuming high gas prices in European market – current price €77/MWh = $25.8/mmBTU), 350 days/year, 0% tax

(50,000*$10*0.75*0.965*350) + (20,000*$20*0.75*0.965*350) – $18.75M-$11.25M-$15.75M = $182,231,250/year net

Quite a solid project! And these are just the initial numbers... At 100mmscf/d or 200mmscf/d it's multiples from these numbers! The current market cap in dollars is $104M. Even in the "bear" case the initial numbers back the market cap quite well... And the "bull" case is incredible! And this is just for Anchois, the company has other business avenues going for it as well with the hydrogen project, Namibia & Brazil assets and "green" energy projects.