2/2
So in summary, the £2.67/sh shows the incredible value on offer from just a relatively small volume of gas commercialised via a CNG development.
As Paul says in his talk (from 26m 23s onwards):
“I’m not giving away 50% of $1.3Bn potential at this stage. I’m prepared to take the risk, and so should you be!”
It’s pretty clear to me that Paul won’t be giving this away on the cheap, and £2/sh at this time appears to be, in my view, extremely cheap.
Just a quick reminder about that the £2.67/sh valuation comes from the Proactive presentation (Sept 22) and relates only to a CNG development (See slide 4):
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2022/09/Proactive-Presentation-Final-8-September-2022-LATEST.pdf
and the talk:
https://youtu.be/e25SVlLdo3s
And is based on:
> utilising only 135.75Bcf gas (approx 7.5yrs of gas @50mmcfgpd) which is “only 46% of the [net] contingent resources”
As we know, MOU-3 is targeting high case volumes of ~1.8Tcf. Then there’s all the other gas prospects, and the oil.
> “conservative undiscounted net back of $8/mcf” ($8M/Bcf)
Paul has stated that his aim is to sell gas @$16/mcf with net backs of up to $12/mcf, so a potential 50% increase in net-backs (see slide 7).
The net backs include opex and are post-tax, but exclude capex (See slide 7).
The gross capex for a 50mmcfgpd development is $133.85M (net $100.4M). At $12/mcf, this gives daily net backs of $400k meaning that the development could be paid off in less than a year (~335d). Paul states very clearly (from ~21m onwards) that funding such a development (via forward sales / RBL / equity sale) won’t be a problem, mentioning that the CNG project can be ‘self-financing from day 1” via scaling up production.
Of course, higher volumes (>50mmcfgpd) will be sold gas-to-power via the GME pipeline @~$12/mcf, so let’s assume net backs of ~$8/mcf (transport costs via the pipeline will be overall lower than trucking via CNG). So higher volumes over 50mmcfgpd (with PG’s stated target of 150-250mmcfgpd) will achieve lower net-backs but still be significantly accretive to the per share value.
(Of note, over the long-term, with a reliable and cheap source of gas in-country, I would expect Moroccan industry to flourish and new industries to develop (which highlights the beneficial effect PRD will have to the local economy). So ultimately, more gas (>50mmcfgpd) could be supplied to local industry via CNG at higher net backs.)
> £/$ 1.15
Currently a bit softer at 1.24
> shares in issue at the time of ~354M
Currently ~400M (with around 25M owed to PG, plus options and warrants totalling ~58M by my calcs)
So the extra shares and exchange rate will soften the £2.67/sh valuation.
On the flip side, there’s the potential for significantly greater volumes of gas (13X greater high case, just from the Moulouya fan + TGB4 sands, and excluding all other gas prospects and the oil potential) and higher (>50%) net backs which will both significantly outweigh the above negative factors.
And his age doesn’t seem to be an issue at all. Remember, he’s already planning for life after Guercif gas with green hydrogen in Morocco, plus there’s the T&T business which just seems be be starting to gain traction. This all suggests Paul isn’t contemplating retiring any time soon so won’t be pressurised into a quick sale.
1/2
I seem to remember that Eytan initially stated that the desktop studies would be completed by end of Q1, then that timeframe slipped slightly into early Q2. But we should be due some news on this shortly, hopefully to better define the resource potential and geological chance of success of some prospects in OFF-1, including the >1Bn bbl prospect of Lenteja.
Positive data on this front should firm up the share price in anticipation of a subsequent farm-out, which Eytan seemed very confident in being able to achieve this year, particularly considering he said CEG has already had unsolicited approaches from larger companies wanting to farm-in.
So newsflow hopefully incoming this month?
A couple of reports on M&A, of potential interest:
"Exxon Mobil Eyes Potential Megadeal With Shale Driller Pioneer"
https://www.wsj.com/articles/exxon-mobil-eyes-potential-mega-deal-with-shale-driller-pioneer-c48a4747?st=g8aews7nwpgzmkj
"But after posting record profits in 2022, Exxon is flush with cash..."
"Any deal, if it happens, likely wouldn’t come together until later this year or next year, the people said, and talks may not morph into formal negotiations at all, or Exxon may pursue another company. But they said Exxon is on the hunt for a seismic deal to put its windfall profits to use ..."
"Ovintiv Pays Up, Upside for Small Cap Energy Equities"
https://bisoninterests.com/content/f/ovintiv-pays-up-significant-upside-for-small-cap-energy-equities
"An oil and gas M&A boom is on the horizon—if it isn’t already underway. As transactions multiples rise and the industry continues to consolidate, larger operators may soon take notice of the assets held by smaller publicly traded companies. In this environment, investors who bought shares in small cap oil and gas equities at low valuations may be richly rewarded."
Matt, apologies, had it in my head it was you for some reason.
But whoever it was... thanks for the recommendation.
I’m just hugely grateful to Paul and Lonny (and Moyra, Karl, Alistair and the rest of the PRD team / contractors) for granting us this opportunity.
And, worst-case scenario, if all fails and I lose everything…
then I may end up having to live in a tent in GRH’s back garden!
(Then again, seeing the beautiful pictures of GRH’s garden on twitter, as I’m a northerner that’d almost certainly be a step-up from my current living standards ;-)) )
Enjoy the long weekend, all.
(And apologies for my long-winded ramblings)
We all know of Seabright’s brilliant geological posts but another of his comments that really resonated with me was:
“The opportunity of a life time must be taken during the life time of the opportunity.”
I genuinely consider that PRD may be THE opportunity of my lifetime so I’ve acted accordingly (large holding, 100% of my portfolio) and the only thing I really need to do now… is to do nothing! In essence, my most important ‘action’ over the coming months will be NOT to sell (or HODL, if you like), to be patient and to simply let our superb management team define the precise nature of Guercif and realise true value via the upcoming work programme. If successful, I don’t know precisely what the ultimate valuation will be but, as Keith said, it’ll certainly be more than 7.5p! (‘Understatements R Us’, to coin a phrase from GRH.)
And a brief mention of Buffett/Munger, about whom I’ve been reading quite a bit recently (I’d thoroughly recommend Robert Hagstrom’s books on Buffett). Over Buffett’s 65-year investing career, it’s said that the vast majority of his returns have come from only 12 stocks. So even WB only makes a very significant investment every 5 years or so. Investments of such magnitude are therefore few and far between, even for arguably the world’s greatest ever investor.
I also read the 100-baggers book earlier this year (recommended on here by HighlandMatt – thanks Matt) which espouses the same principles that lifetime investment returns are ultimately determined by only a small number of multi-bagger stocks. Similarly, I think GRH mentioned some months ago (via a tweet, apologies if I’ve got this wrong, Graham) that he’d analysed all his buy/sells over many years and came to the conclusion that his returns would have been even better had he simply not traded but fully held his winners to their maximum potential (even if this meant holding a few losers that went completely to zero).
All of which strengthens the argument that the greatest returns are achieved simply by not selling your winners too early (or at all), especially those with true multi-bag potential. As others have mentioned, this may be especially important to keep in mind for PRD over the coming months as our Moroccan assets are proven up, with the threat of a low-ball hostile take-over a distinct possibility.
Which brings me back to CHAR/PRD. Both, I suspect, will do well but I think that it’s PRD that has the true multi-bag potential (100+… or 1000+ in GRH’s case!). Combine that with the downside protection of our T&T and IRL assets and our independently-confirmed 295Bcf contingent resources in Morocco, suggests that the risk/reward of PRD is second-to-none, and hence why I’m completely comfortable holding 100% PRD in my portfolio. Yes, risks still exist and, theoretically, all 3 assets could fail completely, so I’d be wiped out. But I’m prepared to take this risk to partake in what I perceive to the “opportunity of a lifetime”.
(cont...)
There’s certainly been some ‘interesting’ chat over the last few days…
Interspersed with the usual brilliant posts from Keith of course.
As the market’s closed, a few ramblings from me (FWIW)…
The difference between PRD/CHAR has often been discussed on here as being ‘chalk and cheese’ and for good reason, IMO. Perhaps the only similarity may be in the ultimate volume of recoverable resources – both have multi-Tcf potential. But in terms of capex, opex, IRR, time to first gas, quality of management, etc., I personally believe PRD to be far (far) superior on every metric.
I’ve mentioned previously that, in early 2021, I owned CHAR:PRD in the ratio 60:40. But, due to the above reasons, during H1 of that year I moved all my portfolio into 100% PRD. Admittedly, the current value of my portfolio would be significantly better had I kept my CHAR holding (for which my ave. was ~4p) but I still firmly believe that my decision to go 100% PRD was the right one in terms of the quality of the investment case. Of course, only time will tell if this was the correct call, but I think it will be.
I realise that many may think that I’m taking too much risk having 100% of my portfolio in one stock, particularly an apparently high-risk, small cap O&G stock. So here’s my thinking:
My focus is always on the downside risk i.e. my risk of capital loss.
At PRD’s current Mcap of £32M, I think there’s a reasonable argument that this valuation can be underpinned (at least in large part) by the assets of T&T and Ireland alone. That’s why I was so interested in the recent announcements about Cory Moruga, in particular, as it does appear that the T&T business could be about to establish itself as revenue-generating within a fairly short period of time (within 2023?). And the upcoming CM CPR should add much more to our understanding of the true value of T&T and allow the market to more accurately assign value this part of the business. Plus there’s the potential for new CCS EOR deals to be announced, which I expect may happen shortly following CM deal completion. Ireland is a bit more of an unknown due to the politics but, even there, the recent reports about Corrib are potentially very promising.
Which, in essence, leaves Morocco in the price for free which, considering an already CPR-confirmed 295Bcf 2C resources, with a minimum CNG development (10.6Bcf) valued at around 20p/share, plus the huge upside potential to be drilled within the next 2-3 months, is verging on the ridiculous in my view.
So we know the upside potential is huge but, perhaps more importantly, the downside protection within PRD’s wider portfolio serves to significantly reduce the risk of absolute capital loss from holding PRD (IMO).
So that’s the downside risk, let’s think of the upside risk (the ‘fun’ stuff!). We all know the numbers involved (Keith’s posts; Michael Caine; ‘Sleeping Giant’; PRD’s presentations etc.) but I’d like to think a bit more broadly.
(cont...)
Following on from Keith’s post from yesterday re Leviathan, there's a short report in today’s IC which bodes well for M&A:
https://www.investorschronicle.co.uk/news/2023/04/05/bp-s-2bn-deal-could-spark-m-a-in-eastern-mediterranean/
“One of the common themes of the past six months has been the renewed gusto in a sector awash with cash and looking for new opportunities to deploy its cash flow to strengthen and expand current shareholder returns into the medium term,” said David Mirzai, an analyst at broker SP Angel. Referencing the NewMed offer, he said major companies were “increasingly looking to access new large-scale resource bases”.
And just a quick reminder of the potential of Cory Moruga, courtesy of a previous post from Keith:
(thanks, Keith, as ever!)
"....in the southern onshore basin of Trinidad, located along the western flank of the Rock Dome Anticline, north of the Moruga West field and west of the Inniss-Trinity Field. A 2010 resource estimate gives 1.1MMbo, but I have no idea what level of likelihood this represents, nor how the figure was derived.
From NS Energy, 11th September 2018:
"In July to August 2010, T-Rex drilled the Snowcap-1 exploration well in the Licence and performed a flow test in February 2011 during which time the well flowed 29.5-degree API light oil at varying rates from 1,100-1,450 bopd and gas at a rate of 2.2 MMCFG with final flowing pressure of 1,180 psi. Two subsequent extended production tests later produced at sustained rates of approximately 250 bopd on 7 -12/32? choke size (in 2012) and at 80 bopd oil (in 2015) with an emulsion mix due to possible water influx from a deeper sand. It is expected that the well will resume to flow and produce at a fluid-rate of around 100 BFPD with the extent of the water-cut from the well being unknown at present given that it is over three years since the well last flowed. When natural flowing pressure decreases, artificial lift can be used to increase production during this appraisal phase of the field."
Morning all,
Just a quick point about yesterday’s RNS that I’ve been mulling over.
(...and that I don’t think has yet been mentioned on the bb)
It’s currently all eyes on Morocco, and rightly so. The RNS was entitled “MOU-3 drilling update” and the whole focus of the release was on the upcoming drilling and testing programme in Guercif.
However, I thought it was interesting that Paul decided to also make a specific mention, in his comments, of Cory Moruga despite this not having been referenced at all in the rest of the RNS, and I just wonder if the significance of this has been somewhat lost due to the current focus being Morocco?
From his comments, Paul seems to be very confident that the existing wells on CM will be able to produce in a timely (‘early’) manner, meaning that there’s a decent chance we’ll be producing cash-flows much sooner than we were all expecting. Presumably Paul is very aware of the potential of CM (or he wouldn’t have done the deal with CEG) and perhaps has even seen a provisional draft of the CM CPR that has confirmed his own positive assessment of it. So much so that he’s now happy to go on the record by stating the potential for CM:
“...to establish PRODUCTION, independent of the later application of our CO2 EOR expertise, and CASH FLOW from EARLY reactivation of wells that have demonstrated the ability to flow oil at ATTRACTIVE RATES…”
So, thanks to Paul’s pragmatic deal-making skills (re the CEG/Innis-Trinity matter) we may well be a revenue producing company much sooner than we all anticipated. In which case, the risks (capital loss) involved in holding a small cap O&G play like PRD will be substantially reduced.
(And as GRH, quite rightly, often points out such risks definitely do exist, despite the huge potential based on the geology of Guercif.)
Ps – Ford, loved your posts from yesterday- thanks. Really great to hear about your Predator journey (so far… plenty more to come, hopefully!).
Afternoon GRH
If I’m now seeing tweets of yours that are online for mere minutes, I’m starting to worry that you’ll think I’m (online) stalking to you! Just lucky timing on my part (no restraining order required, I promise ;-)).
But I really liked your shark tweet, my take-away being…
The predatorS [plural] are now circling (the) Predator! (and are starting to show themselves...)
Look forward to the next instalment..
Cheers
Trees R Us!
I always love a good riddle, GRH…
Even though, more often than not, I end up barking up completely the wrong tree!
I saw your Stirling Moss tweet the other day and suspected you were hinting at:
“This is the biggest race to the finish any will ever see…”
(BTW, is anyone else getting just a little bit excited, with MOU-3 operations due to start within a mere month or so?)
But now I suspect that it actually relates to ‘SLR’ and its inability to undertake PRD’s upcoming new CPRs on Morocco (Moulouya fan + MOU-NE) and Cory Moruga.
In the Feb 1st presentation, Paul said:
“The other issue for us is that… SLR no longer has the capacity at present or in the very near future to do the CPR. So we’re sourcing another party which we’re in discussions with to do the CPR.”
As PRD and SLR go way back, and Paul has clearly given lots of business to SLR in the past, I thought this was a bit odd at the time as, for such a good customer, I assumed SLR may have made room in its schedule for PRD. But I think you’re suggesting there’s more to it than that, and that maybe SLR has been approached by a third party, perhaps a ‘big fish’ – some might say a shark, with prominent dorsal fins ;-) [referencing a deleted tweet, if this is not too cryptic?!] - to act on its behalf instead?
All very intriguing. Hopefully, I’m at least barking in the correct wood, if perhaps not up the precise tree?! Woof woof!
Cheers
BRV
https://www.malcysblog.com/2023/03/oil-price-genel-kistos-southern-arrow-coro-predator-and-finally/
"Kistos has updated the market on both the UK and Netherlands drilling operations, partially as investors have been looking at marine trackers and in some cases getting the wrong readings. As it is I am very excited by the spud of Benriach which I have been waiting for ages for and could be a big plus for Kistos. Indeed with a combination of tax losses and the Looney tax enhanced investment allowances dry hole costs are just £2.5m.
In the Netherlands the ‘mixed’ campaign is not all bad in my view, whilst operational and mechanical difficulties are to blame rather than any reservoir disappointments, in due course new kit on the platform should mean more wells available.
Going forward I am confident that the outlook for Kistos remains exciting, I know the management team well enough to be able to say that I am sure that following recent choppy markets, for a number of well known reasons, deal flow has been slowed. I would bet that they are still on the acquisition trail but the stormy weather has slowed, rather than knocked off course the M&A activity.
As a result when I do the quarterly update of the Bucket List in the next few days despite unusual recent performance it will show that if you believe the Kistos story, and I most certainly do, then it will look like the proverbial diamond in the rough and shares should be snapped up at these prices…"
NQM,
Thanks for that data. I'm assuming that's total boe per month for the whole Q10-A field. So net to KIST (60%), the per day figures (just comparing Sept and Jan) are:
Sept 22: 4686 boepd (net to KIST)
Jan 23: 3360 boepd (net to KIST)
Considering we were previously producing around 6000 boepd net then this is quite a drop over the latter part of 22 and into 23.
So with the 'mixed' results from the recent Q10-A operations, I think it's very unlikely that we'd have been back up to around the 6k level (which I was hoping for) but, at the very least, it'd have been nice to have been given some updated flow rates so we know where we are as of today.
Last year the FY results were released on 7th April so presumably it'll be around the same time this year (with adjustments for Easter of course). So, hopefully, AA will take that opportunity to provide us with a more comprehensive update including flow rates, cash position etc?
Agree - not even a mention of what the current production rates at Q10-A are which is a pretty poor show IMO (and we can only assume that they're not that great, or else surely AA would have put it in the RNS).
With Benriach not due to provide results until Q3, we're really only left with the hope of either M&A activity and/or debt reduction / returns to shareholders (buybacks +/- dividends) to provide us with some positive newsflow over the next few months. Hopefully, AA has something up his sleeve to pull us out of our current malaise.
https://www.ft.com/content/913db0ed-ccb6-4cde-8d39-f1f78b1240f5
Headline:
UK government expected to offer energy companies windfall tax relief
Lower fuel prices spur hopes the levy will be reformed as sector is being encouraged to invest in new projects
A few snippets:
"Britain’s oil and gas companies are next week expected to be offered the prospect of windfall tax relief, as prime minister Rishi Sunak looks to boost investment and improve the country’s energy security."
"Ministers have been discussing with the sector a promise that the 35 per cent windfall levy on profits would cease to apply if energy prices fell below a specified “normal” long-term level."
"People briefed on discussions between industry and the Treasury said Hunt was looking at a price floor so that the levy would not apply if energy prices fell below a certain level."
Thanks Keith,
I think it’s also interesting that in both of the September 2021 presentations it’s estimated that each well would cost $3.3M.
Last week’s placing RNS showed that the wells are now being drilled for under £2M (<$2.5M) i.e. that’s about 25% cheaper than previously estimated.
Considering all the industry supply chain issues and rampant inflation over the last 12-18 months, this does suggest that Paul and Lonny are doing a terrific job at finding cost savings and/or making the drilling more efficient.
We’ve always known that PRD’s drilling costs at Guercif were pretty low (certainly compared to Chariot) which was one of the (many) reasons the investment case for Predator was so compelling. But it does appear that the capex metrics (and so, ultimately, the IRR) are getting even better – that’s quite some achievement from our management team IMO.
Valaris 123 is simply the rig that was contracted by KIST to undertake work on the Q10-A field. See the most recent update for info of the work that was undertaken:
https://www.londonstockexchange.com/news-article/KIST/benriach-operational-update/15799913
The fact that it's now moved off position tells us that the work programme has been completed (hopefully successfully) so we can expect an update on the current flow rates imminently (I'm actually somewhat surprised we've not heard something already tbh).
FWIW, I bought a few more today. Significantly oversold (daily RSI 21) on the charts so hopefully this will turn out to be a decent medium-term entry price. I don't expect AA will be in any way happy with the current share price considering he own ~15% of the company.