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Https://avacta.com/wp-content/uploads/2023/12/AVA6000-Data-Release-13-December.pdf
Https://www.malcysblog.com/2023/12/oil-price-kistos-reabold-chariot-and-finally/
"This is good news for Kistos shareholders and there is little doubt that they will recognise the strategy this time being adapted by Kistos. It goes without saying that the company has chosen to move cash trapped in the Netherlands by paying down all the outstanding bonds.
This saves the 9% coupon and as mentioned above gives Kistos the flexibility to distribute cash should they choose to. As always this could be via dividends or share buy-backs but either way I would suggest shareholders will benefit from this move.
Finally I notice that last week there was a shut-in at the Shetland Gas Plant after a minor incident in which no one was injured. I understand that production should be restarted before the year-end and that it will not affect guidance issued by Kistos."
* [for clarification]
Admittedly, CHAR has the Loukos licence onshore that may provide a quicker route to first gas *compared to Anchois*, but of significantly lower volumes than are likely available at Guercif
i.e. PRD is likely beat CHAR to first gas for the Moroccan industrial market too
On first read-through, a few points on CHAR’s deal:
*Capex for Anchois now up to $850M. (CHAR’s initial estimate was $300M, which then increased to $500M. It’s now even higher.)
*Energean clearly wants flow testing data (CHAR previously said this was not necessary for FID)
*Assuming +ve drilling and flow-testing results, FID will occur sometime in 2024 (probably H2 24, once all the data has been analysed?)
*CHAR’s initial estimate for first gas was end 24 / early 25. However, and as CHAR previously suggested that it would take approx 2 years to achieve first gas from FID, it now looks like first gas will be sometime in 2026 (and maybe 2027?).
Compare the above with PRD:
*Capex for CNG ~$5M net. I think Keith previously estimated capex for G2P/G2EU via GME of less than $100M.
*Testing next month. FID in Q1 24 (CNG)
*First gas in late 2024 (early 25?) (CNG).
(Admittedly, CHAR has the Loukos licence onshore that may provide a quicker route to first gas, but of significantly lower volumes than are likely available at Guercif)
The market’s initial reaction to CHAR’s deal looks to be pretty muted and, IMO, for good reason.
Hi Jimmy,
This may or may not be relevant to the specific issue you mention but, from the recent discussions I’ve been having elsewhere (with someone well-versed in the subject), the global well testing environment is currently extremely challenging and, indeed, has been since the pandemic.
As a result, all O&G companies are finding it very difficult to keep to schedules due to supply chain issues and are often let down at the last moment. And this is true even for very deep-pocketed majors/supermajors who have some degree of influence over the service providers, but it’s still no guarantee of equipment and personnel being available exactly when and where you want them. (Supposedly, Aramco is top of the tree and takes priority, but for the rest it’s just a bit of a bun fight!)
So a company the size of PRD, with relatively limited funds, will unfortunately find it incredibly difficult to access all the equipment it needs for testing operations precisely when it needs it and/or at a reasonable price, so this may be a possible reason for not being able to procure a better-sized perforating gun at this time.
Of course the current very difficult environment makes it all the more frustrating that, as per the recent RNS, it sounds like we were all set-up to proceed with testing in early November but were then scuppered by an administrative issue out of the company’s control. So from everything I’ve been hearing, it’s pretty clear that Paul and Lonny are working wonders to get us to the point of being able to test, as delays and compromises are basically an inevitability for all companies in the sector at the moment.
Hope this is of some interest?
BRV
Hi Keith,
I was recently sent this article in relation to the BP/ADNOC acquisition of 50% of NewMed which suggests that, somewhat surprisingly perhaps, the deal remains on the table:
https://www.reuters.com/markets/deals/bp-says-bid-acquire-stake-israels-newmed-track-2023-10-11/
“BP remained "very optimistic" about the deal despite the escalation of violence between Israel and militants in the Gaza Strip in recent days…”
“"Despite the recent geopolitical events and the request for a higher price from the panel reviewing the proposed acquisition price, BP continues to highlight the Newmed deal as an example of innovative upstream partnership and confirms the attractiveness of the assets and the broader region," Jefferies analyst Giacomo Romeo said in a note after the meeting. A source close to ADNOC said the company "remained committed to the deal and continues to see value in it."”
The report is from 11th Oct so is now nearly 2 months out of date but I can’t find any more recent news releases that contradicts this. So, presumably, the tie-up is still a viable option despite the Israel/Gaza conflict.
Ps – Nice to see Carl adding £20k’s worth of shares (looks like an in-the-market purchase as far as I can tell).
ShortShrift,
Just to confirm, I didn't buy in to PRD based on anything GRH advised.
I bought in initially in July 2020 based on one factor alone: Paul Griffiths.
As an ex-FAST shareholder, I’d always been impressed with PG’s integrity and ability to identify assets with significant potential. In addition, his large shareholding in PRD was a huge draw – an ‘owner operator’ is a key factor in any investment decision I make.
It was only subsequent to my initial purchase (and, looking back, I wish I’d bought a lot more then!) that I became aware of GRH via the bb. And I’m personally very glad that I did as he’s added a huge amount to my understanding of the company and the markets as a whole.
As I’ve said before, I consider every day to be a learning day… and I’m very fortunate to have had the opportunity to learn from posters like GRH (and Keith, Seabright, Wacky, Methodology, Jimmy etc too, of course).
ShortShrift,
As you say, let’s not labour the point…
However, I disagree completely with your view that GRH has any sort of responsibility (towards anyone). By posting on the bb, he’s not acting in the capacity of an accredited financial advisor. As such, my opinion is that the responsibility lies solely with the reader.
As for my own portfolio, I understand your point about risk mitigation and, with this in mind, I would ordinarily run a focused portfolio of 5-8 stocks. Indeed, this is what I did until the last year or so, although PRD was always a large % holding. However, and although I still like all the other companies I held (and they remain on my watchlist), my research led me to the conclusion that the risk/reward for PRD was truly exceptional, and far, far superior to any of the other stocks I held. You’ll also recall that, in the Proactive presentation in May this year, Paul called Guercif a “once-in-a-lifetime opportunity”; in essence, after all the research I’ve done, I can only agree with this assessment and it’s the reason that I took the decision to hold only PRD.
(Of note, there is, of course, some diversification inherent to PRD by nature of it having three assets in different jurisdictions. This is why I was particularly pleased by the recent confirmation of the Cory Moruga acquisition which, in my view, adds significant potential value and further underpins the investment case for PRD.)
Ultimately, only time will tell if my decision to focus solely on PRD is the correct one. But, as I say, whatever the outcome, I’m personally very comfortable with my process and level of risk.
(cont... 2/2)
One final thought (sorry, I realise I’m prattling on here)…
I’ve recently been listening to the ‘Acquired’ podcast which takes an in-depth look at what makes great companies so successful (and which I’d highly recommend). In the episode on Amazon, Jeff Bezos’ “Regret Minimisation Framework” was discussed which Bezos uses when making key decisions. In essence, if you imagine looking back on your life when you’re 80yrs old, which decision(s) would you regret the most?
So would I regret taking a large (potentially life-changing) decision to build up a sizeable position in PRD, with the (small, IMO) chance of losing it all? Or would I regret it more if I kept my PRD holding to, say, a more ‘sensible’ level of 10% of my portfolio, but then missed out on the massive upside should PRD perform as it has the potential to do?
With 100% of my portfolio in PRD, I’ve already answered that question for myself and that level of risk is right for me personally. Whatever the outcome for PRD, I am certain that I will have no regrets. And I take full responsibility for my decisions – if it fails, then it’ll be on me, and me alone.
So some of the posts suggesting that GRH should feel responsible for others’ decisions is just simply wrong (and offensive), IMO. Indeed, the opposite is true, in that he’s always stressed personal responsibility and the need for us all to fully research our investments in PRD.
I’m sure many of us (in fact, the majority) are extremely grateful to Graham for his invaluable advice and guidance over the years, without which I certainly wouldn’t have recognised the magnitude of the opportunity in PRD.
So this is a very long-winded way of saying…
Thank you, Graham 😎
Morning all,
Just to add a few thoughts to this discussion… (FWIW)
As I’ve mentioned before, I have 100% of my portfolio in PRD. In terms of absolute numbers of shares it will, of course, be fairly insignificant compared to the number held by GRH (and, presumably others too). But, it’s a decent chunk and constitutes a fair % of my net worth (which, I will add, is nothing to write home about!).
Like many on here, I’m indebted to GRH for his freely-given advice over the years which has played a large part in giving me the confidence to build up a sizeable holding. Of course, he’s kindly shared much company-specific information which has been extremely useful, but this isn’t the main reason I’ve invested.
The most important lesson I’ve learn from GRH is to DYOR+++, and he’s been consistently clear on the importance of this. In essence… research, research, research… and then do some more research! And it’s GRH’s encouragement to do just that that has allowed me to become comfortable with building up a reasonably large position in PRD.
One of my favourite Charlie Munger quotes is:
“The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds.”
So the question is whether we “have the odds” with PRD? Of course, this is something that each investor must decide for themselves but, clearly, I’ve come to the conclusion that we do.
The significant upside in PRD has been discussed many times on here (multi-Tcf potential, plus the oil leg etc. etc.). But what interests me most is focusing on the down-side risks and it’s the low threshold for commerciality (2-5mmcfgpd for CNG) that, for me, makes PRD so appealing.
You only have to read the published RNSs, CPRs and presentations provided by the company and then compare them to the flow rate data per metre of net pay across other wells in the Rharb basin (huge thanks, as ever, to Methodology for this) to realise that the odds are in our favour. Also, and as I’ve mentioned before, I’ve been chatting to someone in the industry who, as a result of their direct experience in the field, is extremely conservative when it comes to well performance, and yet is also very confident that the minimum threshold for commerciality is ultimately likely to be exceeded by some margin.
So no guarantees, of course, but my research has led me to believe that the odds appear to be well in our favour.
(cont.... 1/2)
I’ll admit that I’ve so far only skimmed the Irish Government Energy Security Report, but I’d tend to agree with Jimmy that Mag Mell appears to be a non-starter.
Unfortunately, regarding offshore licences this tweet from the Irish Offshore Operators’ Association doesn’t sound very positive either:
https://twitter.com/OffshoreIreland/status/1724722975226663080
“In response to the publication of the long awaited Govt Energy Security Report please see below our initial statement. IOOA will be doing a deeper analysis of this paper & the implications for future of Ireland’s #EnergySecurity which will be submitted to Govt & published shortly.”
Statement:
“The Irish Offshore Operators’ Association (IOOA) is very disappointed to see that the report rejects the potential of indigenous offshore gas resources. These have a significantly lower emissions intensity than the imported gas that is acknowledged as being essential for the coming decades, and which could be replaced by indigenous gas.”
Overall, not a great day for the future of our Irish assets by the looks of it.
Morning Mossma,
Many thanks for that info.
So based on CEG’s H1 23 figures (based mainly on I-T and Goudron), the net backs are ~$32.75/bbl, significantly higher than the TRex values projected for Cory Moruga back in 2018. And presumably PRD may be able to improve on that figure even more with operational efficiencies (including the use of CO2 EOR), good pressures in a near-virgin field (2076 psi), efficiencies of scale etc. so the $40/bbl net backs you suggest may indeed be very achievable.
I’d assumed that the $18.3/bbl would be conservative but, even at this low level, the potential cash flows (net 83.8%) from Cory Moruga at the higher production rates mentioned in yesterday’s RNS (5000-9000bopd) would be very significant indeed, particularly when you consider our current Mcap/EV. And at $40/bbl net back, as you suggest may be possible, Paul’s deal for CM looks even more impressive (assuming the full FDP can be executed successfully of course).
I’m sure the Independent Technical Report for CM will provide some further clarification on projected net-backs.
Thanks again.
Mossma,
The only figure that I've seen was in PRD's recent interims, based on the 2018 FDP sumbitted by TRex:
"Undiscounted netbacks after all royalties and taxes at WTI US$65 was demonstrated to be US$18.3/bo"
Clearly, this is now 5 years out of date and WTI is currently ~$79/bbl.
There are also the unrelieved tax losses (at least $45M within PAREX and TRex) and the quarterly arrears payments of just over $3M gross that are tax deductible to consider - presumably these will improve profitability further?
Also, it's worth noting the significant upgrade in the scale of CM production from 2018 to now, with the original FDP based on average daily production of 256bopd compared to Paul's upside estimate of 5000-9000bopd. Clearly, Paul thinks he can add huge value to Cory Moruga compared to what was originally planned for it.
Donal,
I did wonder if this was what Paul was alluding to in his comments today:
“Cory Moruga will provide newsflow over the next 12 months but most significantly creates the opportunity for cash flow in 2024 to protect against difficult market conditions and negative investor sentiment caused by uncertainty generated by regional conflicts and poorer global economic performance.”
This did strike me as a bit odd I must admit… and suggested that perhaps the current middle east conflict was throwing a spanner in the works in terms of doing a deal in Morocco (re NewMed)?
Revoy,
I think it's fairly self-evident that if the gas at Guercif doesn’t flow then the asset will be of no value.
However, if you read Methodology’s excellent ‘Net Pay vs Well Flow Rate’ post on Reddit and then compare not just the average but indeed the worst-performing wells in the analogous Rharb basin (on a flow rate per metre of net pay basis) to the total net pay found to date at MOU-3, MOU-1 and MOU-4, I think that you’ll consider this outcome to be extremely unlikely.
https://www.reddit.com/r/PredatorOilandGasPRD/comments/t8ssg0/mou1_the_rharb_basin_net_pay_vs_well_flow_rate/
As we know, the CNG project is commercial at flow rates of just 2-5mmcfgpd. So it’s very likely that flow rates from just the Moulouya fan sand in MOU-3 alone will exceed this threshold by a considerable margin.
In simple terms, Keith perfectly summed things up in his post from yesterday:
“In the next couple of weeks, we will have confirmation whether all this gas has been trapped (it has) and can be flowed economically (it will) and if someone is prepared to buy it (they will).”
Of course, please DYOR.
(cont...)
However, as has been discussed on here by our regular and respected posters, there’s considerable running room in the very large Guercif licence. Paul has, to date, only offered us glimpses of what might be present in terms of additional Tertiary and Jurassic (and Triassic, which he hasn’t even really mentioned) prospects. (As Paul said during the Proactive presentation of Sept 22, ONHYM doesn’t like companies “publishing anything ahead of schedule or ahead of consultation with them.”). But this highlights the importance, IMO, of the stub equity / royalty part of any deal i.e. future cash flows from as yet unspecified prospects are likely to be as significant (if not more so) than the initial up-front payment for PGVMB. And this is why GRH suggested, when previously suggesting a valuation for PRD (in relation to the ‘Business Development Update’ RNS of March 21), that we should think in terms of total capital return over the lifetime of the assets rather than simply a specific share price.
My own approach is always to be as conservative as possible in attempting to calculate a (range of) possible valuations, but I’m sure we’d all come up with slightly different numbers depending on our own views on ultimate recoverable resources. However, the one thing I’m pretty confident about is that any valuation will be significantly above 11p per share (assuming commercial flow rates, of course), hence why it’s been a fairly easy decision for me to keep adding to my PRD holding at these levels.
Just my two-pennies-worth (FWIW)...
Morning all,
Just a further thought on valuations (and I hope this post is far more reasoned / sensible than the one I posted yesterday!)…
Have a look under the right hand chart (‘Net Predator Values) on slide 6 from the Proactive May 23 presentation:
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2023/05/Proactive-Presentation-18-May-2023-FINAL.pdf
• Morocco CNG US$4.84 million/BCF @10% NPV (Management estimate)
• Morocco Power US$1.99 million/BCF @10% NPV (SLR Consulting CPR 2020)
• (Hence MEM’s use of a non-linear valuation)
• (It’s also worth remembering that Keith previously suggested a 12% discount may now be more appropriate considering the cost of capital has risen significantly)
So, depending on how many Bcf/Tcf (net) you think we’ll end up with at the time of the sale of PGVMB, you can calculate an approximate NPV10 using the above.
It’s then worth re-reading Keith’s post (‘Discount to NPV’) from 16/7/23 about what value a potential purchaser may actually pay in relation to the NPV10:
https://www.lse.co.uk/profiles/keithoz/?page=13
“My conclusion is that normally an O&G company at our stage of development might attract bids of perhaps 25% of NPV, but we have a number of highly favourable factors that make Guercif a lot more attractive than most similar-sized projects. Add to that the proximity to the TMP and EU markets, and PRD has an additional advantage of being much more of a strategic fit for many majors than, for example a project in Zimbabwe. I'm sure a company such as Repsol would be happy to pay in excess of 50% of an NPV12, and I'm sure that Paul would not want to let it go for less.”
So this is approach I use in attempting to estimate the range of what a realistic offer to buy PGVMB might be.
(cont... )
Thanks Keith,
I read your initial post without first seeing your correction and, using the figures provided, calculated a (roughly estimated) NPV10 (@$2M/Bcf) of over £4Bn PER SHARE!!
Wow, I thought, Keith’s really lost the plot as that’s a wildly ridiculous number!
Then I saw your correction post, and using the new figures you provided, my rough estimate NPV10 came to around £75 per share…
...which, of course, I thought was a much more sensible and realistic value 😎
(A bit) More seriously… great posts as ever Keith. Thanks.
Ps – and just a quick reminder of Wacky’s recent estimate of Jurassic GIIP of (a mere!) 91Tcf:
https://twitter.com/TheWackmeister/status/1711820551461773537
and
https://www.lse.co.uk/profiles/thewackmiester/ [see post of 11.10/23]
I think that's far too much excitement for a Saturday morning... I'm off for a lie down 😉
Morning Androcles,
I’m possibly as puzzled as you are!
But, FWIW, my interpretation, after repeatedly re-reading the 5th Oct RNS, is:
The GSA to buy gas at the well-head would mean that the “downstream energy company” (perhaps Vivo Energy?) that PRD is having discussions with would be responsible for the transportation (trucking) of the CNG from the CNG facility to the end-users (Moroccan industry).
However, the capex and opex for the CNG processing facility itself (e.g. compressors, buffer storage, loading and unloading facilities etc - see slide 15, Proactive Presentation May 23) would still need to be financed by PRD and ONHYM on a pro rata basis.
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2023/05/Proactive-Presentation-18-May-2023-FINAL.pdf
Hence why, to me at least, the RNS read that once the GSA was signed, then PRD would look to secure financing to fund the development of the CNG facility (now to be based around MOU-3).
I suppose an alternative outcome would be that the GSA would fund both the trucks and the CNG facility, negating the need for PRD to secure any additional funding for the CNG development at all. Even if that were the case, it would still be prudent for Paul to be having provisional discussions with creditors just in case the at-the-wellhead GSA deal falls through, and we go back to the original plan of selling the gas ourselves direct to the industrial market, with the requirement for PRD (and ONHYM) to fund both the CNG facility and the transportation (trucking).
That's just my reading of things, but perhaps someone with experience in the industry could better shed some light on this?
Thanks Lancygeo,
A timely reminder of the brilliance of Seabright...
Another of Seabright’s pearls of wisdom which really resonates with me is:
“The opportunity of a lifetime must be acted on within the lifetime of the opportunity.”
I’ve mentioned this a few times before, so apologies for the repetition. But this feels even more relevant now with the expectation that, starting imminently, there is likely to be lots of (hopefully) extremely positive news-flow released over a very short period of time (i.e. the next few weeks and months), including:
• Flow test data from MOU-3 and MOU-1, leading to (upon approval) a Declaration of Commerciality.
• GSA, following “substantive negotiations” to sell our gas at the well-head “on a larger scale than was previously envisaged by the "Proof of CNG Pilot Concept" strategy”. It’s worth remembering that “The Company is confident that the testing programme will deliver the results necessary to progress commercial negotiations for the offtake of its share of future potential CNG gas from the well head.” [RNS 5/10/23]
• Financing of the CNG development: “The Company is also in discussion with several parties regarding the financing of the CNG development.” [RNS 5/10/23]
• Further drilling: Jurassic appraisal (crestal location, with over 200m of reservoir targeted); MOU-3 shallow twin; +/- Tertiary in-fill.
• New Guercif CPR.
• M&A – possible sale of PGVMB and plan for special dividend payment.
• Cory Moruga deal confirmation (+/- deal on Innis-Trinity?) - within next 27 days; new CM CPR released; CM forward plan for 2024.
So it definitely feels as though the window of opportunity to acquire PRD stock at these levels is rapidly closing (assuming +ve flow test results, of course). In fact, might an entry at a double-digit share price soon be a thing of the past, I wonder?
And it’s usually a good move to follow the smart money (see GRH’s post from yesterday).
I certainly have been… as I consider the risk/reward to be compelling at these levels.
GLA