Firering Strategic Minerals: From explorer to producer. Watch the video here.
Hi GRH,
Thanks for taking the time to reply, and fully understand your wish not to respond.
Thank you anyway
Cheers
BRV
Hi Surfit,
Yep, interesting chat... though I’d have also liked to have had a few comments on SQZ!
The Q10-A production is clearly not ideal but it sounds like we’ll have to wait for the third-party review of the recent drilling campaign before AA initiates a plan of action, but the positive was AA saying:
“I think we’ve got our heads around it now. We’re about 18 months into owning it… we’ve got our heads around it.” - so hopefully it’s solvable.
From the previous RNS, it sounds like any further Netherlands drilling will be done in conjunction with the Orion development in 2024 but, as you say, at what cost? So perhaps the best we can hope for over the next 12 months is that the Dutch production at least remains stable.
As for M&A:
“We are already looking and reviewing other acquisition targets in all 3 jurisdictions that we’re currently represented in, and a couple of others.”
So my feeling is that further deals will be incoming shortly, probably in Norway. But any new areas would be interesting too.
AA’s summary:
• Very regular cashflow coming out of GLA and Netherlands;
• Exciting drilling in Benriach (“Don’t forget Benriach!” - AA seemed very animated on this!);
• Exciting upcoming FIDs for Edradour West and Glendronach;
[I actually can’t find any previous mention or info on Edradour West at all, so I’ve no idea on its size or expected
production profile etc]
• Sale-away for Balder X FPSO in 2024 with significant uplift in production to follow;
[the King prospect @60-135mmbbls recoverable (10% to KIST) in the deal for free was interesting to hear]
• Plus the uplift in horizons for being in Norway;
• ...And if no other deals, then return cash to shareholders.
Overall, pretty positive in my view.
Morning GRH,
A quick question relating to any potential deal, if you don’t mind me asking, please?
Would you expect any deal to include clauses relating to certain deadlines being met for progressing the development of the asset, including, perhaps, additional payments to PRD should these targets not be met?
For example:
- time to first gas for CNG (say within 12 months of deal completion)?
- time to first gas fed into the GME pipeline, for gas-to-power and/or export to Europe (say within 2-3 years of deal completion)?
One would assume that any in-coming new owner of PGVMB would be incentivised to expedite revenues for its own purposes anyway. Similarly, I’m sure that the Moroccan authorities would also be keen to ensure that first gas is achieved promptly in order to benefit Moroccan industry and the wider economy as soon as possible. So I realise that such clauses, at least in theory, should be unnecessary.
However, do you think it would it be prudent for Paul to insist on such clauses in order to ensure that the asset is definitely developed within a reasonable time-frame and, therefore, that royalty payments to PRD would commence within a timely manner? And that if such doesn’t occur, then PRD would be appropriately compensated?
Many thanks in advance for your thoughts,
Cheers
BRV
Morning all,
A quick reminder of Paul’s comments from 30m23s:
“After MOU-3 we’ll be in a clear position that we may not even have to wait till the ‘MOU-next well’ results based on what we have in MOU-1 and what we hope to have in MOU-3. Then this process will move very quickly because we’re creating, if you like, not a bidding war but we’re just basically saying that there are several parties who are fundamentally interested in this…”
So my only thought would be that, if there are several parties interested for what, as we all know, is an asset with incredible potential and value, then in contradiction to what Paul said, the real question for me is:
Why wouldn’t there be a bidding war?
IMO, Paul’s effectively stated that he’d be happy to accept $5M/Bcf (with 40Bcf being representative) with a 10% royalty for all future gas (and oil?) sales from PGVMB. But if there are genuinely ‘several’ interested parties then surely when the first-mover matches Paul’s representative valuation the others are not simply going to shrug their shoulders, give up and walk away. Why would they when the size of the prize is so large and making an improved offer would still give an excellent long-term IRR?
Thoughts on this appreciated…
Malcy's interview with AA:
https://youtu.be/0rp_TIInYio
Morning GRH,
Hopefully I’m reading this correctly, but on reviewing the Proactive presentation from Sept 2022, that valuation of 267p/share was based on a ‘conservative undiscounted net back of $8/mcf’.
As it’s ‘net backs’, I’d assumed that meant that costs (capex/opex) was already included in that valuation? (have I got this wrong?)
As we know, Paul has stated that he hopes to achieve $16/mcf sales for CNG, giving net backs for volumes >10mmcfgpd (which should be readily achievable) of between $9.79 and $12.19/mcf (depending on level of capex+opex).
Shares in issue at the time were 354M in Sept 22. Including shares owed to Paul, I reckon there is now around an extra 20% in shares as you say (excluding options and warrants).
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2022/09/Proactive-Presentation-Final-8-September-2022-LATEST.pdf
(slides 4 and 6)
So with net backs of between 25-50% higher, hopefully there’s room for some upside on those figures? (and apologies in advance if I’ve got this muddled!).
My simple calcs from the podcast was that Paul is hoping to achieve $5M/Bcf. Which is pretty much the figure given in your Michael Caine post re the CNG development back in March 21 (£3.88/Bcf). Plus 10% royalties for any production >40Bcf of course.
Cheers
BRV
Interview with AA inbound:
https://twitter.com/mgrahamwood/status/1650789038511517696
"I’m delighted to say that I am heading for Core London to interview Andrew Austin @kistosplc should be fun and interesting after his recent deal . Malcy"
EOG chat with Malcy, from ~6m, from today:
https://youtu.be/KQDVxG-H0O4
There's a bit of read-across to PRD during the discussion as it's mentioned that the EU is encouraging member states to bring online gas resources in the near term, and also that the Taoiseach (LV) has specifically mentioned the wider Corrib area as a potential source of indigenous gas (as we know).
(Not sure why EOG CEO thinks his company is the only one with assets adjacent to, and on trend with, Corrib though... think he might be 'conveniently' forgetting PRD!)
donalb - thanks for that heads-up.... how many of us BRVs are out there, I wonder?! :-)
(BTW, I still say I learnt everything I know about investing from watching Trading Places on hard repeat as a kid... but perhaps that's why my portfolio is doing so badly! However, it's also definitely why I love pork belly so much!!)
And Matt, I also had it in my head that Ron P was still involved somehow in Ireland. Perhaps he's hung up his boots for good?
Cheers
BRV (one of many...)
A few comments from the podcast on Ireland that I thought were particularly noteworthy:
As Paul said at the start of the podcast:
“...do not underestimate the other potential value in the company which could crystallise at any time over the next 12 months.”
Discussion on Ireland from 45m20s onwards:
“I won’t say we’re winning because you never win in Ireland, it has to be a compromise, but only last week the Minister gave an interview with the Sunday Business Post in which he talked about a 180-degree U-turn on LNG in Ireland. That’s the BEGINNING of the finger coming out of the dyke in my view, that the REALISM HAS TO HAPPEN…”
“[Ireland] had the opportunity to be the first-mover in Europe [for LNG], we gave them the first opportunity with the Mag Mell project in 2020, they turned themselves round 180 degrees to be the last in Europe. And they will move eventually, THEY HAVE NO CHOICE.”
“Gas can contribute to security of supply and ameliorating energy price rises in Ireland – they [govt] are BEGINNING TO REALISE THAT.”
[re Ram Head / Kinsale pipeline]: there’s absolutely nobody else that can say that they have some form of legal right to utilise that infrastructure…. So it puts us in a unique position – NOBODY ELSE CAN COMPETE WITH US offshore Ireland on an offshore FSRU LNG solution and that’s what we’ve been plugging away at for the last 9 months.”
I also thought that the mention of Theseus was interesting:
“There is a partner, Theseus Ltd., with 50%. That partner was created before our IPO way back in 2014/15. I own 50% of Theseus which is all declared and my partner Vivian Caston owns the other 50%, and that is obviously reversible at any time into Predator to gross the asset up to 100% and we have then, effectively, 100% of the resources.”
I can’t find too much specific information on Vivian Caston but he’s a geologist, ex-Providence resources and clearly worked with Paul during his time on Fastnet, so presumably they’ve known each other for a long time:
(see slide 6)
https://www.raglancapital.ie/wp-content/uploads/2017/05/fastnet_proactive_presentation_july_2014.pdf
https://find-and-update.company-information.service.gov.uk/officers/7N1fKO5UvT9LI76PtsidfEabUKU/appointments
And finally, while summing up at the end:
“Your market cap is always not going to reflect what the potential value of the company is… [but] it only takes ONE WELL or ONE AGREEMENT to change that value and it will be changed OVERNIGHT…”
I’ve now listened to the Morocco section three times and it’s the sheer speed of the process which strikes me the most:
(30m23s)
“After MOU-3 we’ll be in a clear position that we may not even have to wait till the MOU-'next well’ results based on what we have in MOU-1 and what we hope to have in MOU-3. Then this process will move VERY QUICKLY because we’re creating, if you like, not a bidding war but we’re just basically saying that there are SEVERAL PARTIES who are fundamentally interested in this, and just say “well, here you go”: If you’re going to do due diligence on the whole block, you’re wasting your time. Do Due diligence on what MOU-3 and MOU-1 have discovered, with the upside of MOU-2 re-entry etc and all the other prospects. And that’s what you’re basically paying for, to buy into this gas business at VERY SHORT NOTICE.”
And I liked this bit too:
(12m27s)
“Morocco’s the focus, but do not underestimate all the other potential value in the company which COULD CRYSTALLISE AT ANY TIME OVER THE NEXT 12 MONTHS…”
Very interesting few months ahead...
29m 39s:
PG: [Guercif] “We want to be in a position BY SUMMER of an exit route and a value….”
Vegas, MEM,
Good discussion on valuations, thanks.
Your chat made me review (for the umpteenth time) GRH’s summary of the 18th March 2021 ‘Business Development Update’ RNS (better known as the ‘Michael Caine’ post, of course).
There’s one line of GRH’s post in particular always makes me chuckle (in a good way). In the factors that he thinks need to be considered in order to make downward valuations on the price that will be achieved per Bcf, he includes:
“The possibility that not all of the “recoverable resources” can be recovered during the licence period or extensions thereof.”
Well, the Guercif exploitation licence is 25 + 10 years…. so a max of 35 years available to produce gas.
And yet GRH suggests there’s a chance that this may not be long enough to get all the resources out of the ground.
Seriously… just how big is this thing?!!
I think we may need another pipeline ;-)
RNS:
https://www.londonstockexchange.com/news-article/KLSO/update-on-thg-investment-and-placing/15925580
And just for interest, here's the statement from the Healthy Markets Initiative:
https://cdn2.assets-servd.host/shareaction-api/production/resources/reports/Investor-Statement-Nestle-19th-April-2023.pdf
Jimmy, great post – thanks.
I think you’ve just perfectly summed up the investment case for PRD in terms of risk/reward:
“Even if the porosity permeability were 50% of that reported by nutech you would still get one hell of a flow rate.”
So there’s a very reassuring margin of safety with regard to PRD achieving AT LEAST the minimum flow rates required for a commercial CNG development (2-5mmcfgpd). And with huge potential upside of course…
Thanks again.
https://twitter.com/OilGasTracker/status/1648575552125652995
"#KIST Kistos is paying $4.6/2P barrel or $2/2P&2C barrel for Mine Petroleum. Kistos were trading on $4.9/2P barrel prior to the deal, but Norwegian reserves are general trading at a higher multiple versus UK & Dutch reserves which Kistos is currently holding."
A bit of info, and perhaps more upside potential:
https://varenergi.no/news/significant-discovery-in-the-north-sea/
"This is fantastic news. We know that there is significant remaining exploration potential in the Balder licenses..."
On the last update (18th Jan), GLA was performing well:
"Since Kistos completed the acquisition of a 20% working interest in the GLA in July 2022, the asset has continued to perform well. On a pro forma basis, average production for the year was 6,000 boe/d net to Kistos and uptime was more than 95% (excluding planned maintenance)."
So, unless performance has reduced dramatically at GLA, I suspect the reduced production projection for this year is likely to be due to Q10-A.
As we know, the recent Netherlands campaign produced 'mixed' results "due to mechanical issues arising from utilising the existing well stock rather than reservoir performance issues." However, there is still the potential for an improvement in Q10-A production after further drilling in combination with the Orion development drilling next year. But, for the next 12 months or so, I think it's likely there will be sub-optimal production from Q10-A, unfortunately.
I'm hoping for more details on this from AA in his chat with Malcy i.e. precisely what was achieved from the recent drilling and work-over campaign at Q10-A and how might this be remedied going forward.
SpArmada, great summary and agree with all that.
I also particularly like the extended visibility it offers with the Balder X project extending the lifespan of the Balder hub out to 2045. So this isn't a short-term deal, it's a 20+yr deal.
Back in 2021, AA told Malcy that he was hoping for 20-25k boepd production based off the then existing assets at the time. So I still think he'll be hungry for even more deals. I like Norway - it's expensive (78% tax if I remember correctly) but at least it's consistent in its fiscal regime (unlike the UK/EU) so more deals in Norway would be a great move IMO.
Hopefully a chat with Malcy will be upcoming (we haven't had one in a while) to add a bit more detail to this deal and also some of AA's thoughts for future deals / production targets.