Member Info for Bohemia

An actual production number for 2020 and or H1-2021 would be nice, rather than a vague range.

Current cash at bank, outstanding P1 liabilities, status of the Bahamas renegotiation (unlikely), update on the £2m CCN funding (due no later than today), other liabilities (eg Spain).

Maybe some actual data as to what they found in the deeper Middle Cruse primary S2 target.

SC, you wrote:

“The major could sell its shares and recoup capex leading to spuds x 2. This is not fleecing PIs who love to have a flutter with the hope of a 10-20x bagger. “

What does that mean if not: the major can sell the 10% of CEG its just gained (which represents an indirect 2.5% interest in the Bahamas) for $50m?

No. S2 is being drilled by Well Services Petroleum. S1 was drilled by Talon Well Services, who were spun out of Steeldrum and who don’t seem to have done any drilling since S1.

SC: I believe Suriname is another $0.7m on top of S2’s $3m - perhaps it’s a blessing they are held back but if it is done they are down to $9m after LO/S2/Suriname.

As you have said, only $7m of the $14m is disputed. I’m not sure how you can believe there could be an amicable settlement which doesn’t involve immediately paying the $7m that is not even disputed. Why would any creditor even entertain that idea and sit back while CEG spend their money?

I'm just going to stress again that CEG does not have $20m because that figure includes £2m from the CCNs that has not arrived yet. It is meant to arrive by Monday. If it does, it will go a long way to reversing my scepticism but I just can't see that happening.

The conversion price of 8p is now virtually 3 times the share price. Convertible investors are investing because there is a kicker of equity upside if things go well. When the first tranche was issued pre-P1, the conversion price was 2.5p, a 25% premium to the then price. Something like 20-40% is normal. I'm afraid that IMO the idea that a +200% conversion premium will attract investors is pure fantasy. Plus the liabilities show CEG is desperate for the money. Investors aren't philanthropists: they squeeze borrowers in these circumstance for better than average terms, not softer terms. (Maybe Bizzell is a friend/philanthropist, but very little of the previous CCNs actually came from him.)

The exception would be if CEG really do have a binding commitment from the subscribers, as a quid pro quo for them converting the previous CCNs at 3.5p (instead of the agreed 25p!). And that, if they don't put the money in as agreed, CEG will take them to court (waiving goodbye to the further £10m no doubt). I don't believe CEG have this binding commitment - they certainly didn't pull those strings when the £2m was promised and not delivered in February. But we'll see soon enough and I will certainly apologise if the money does arrive next week.

The question for management, and for LK previously to some extent, wasn't "you have $3m, what are you going to buy" (GY678b or S2). Rather it was "we need $10m, what are we going to sell".

Going back to GY678 might be a profitable well (though you have to wonder how long GY670 performed, and whatever the sands looked like you you'd temper you expectations based on the less good wells) but Goudron is no longer a story to relaunch a company: maybe you'd be able to find 3mbbls worth $15-20m NPV.

What was required for a $10m raise was a plausible case of a low risk well that, if it works, launches a project worth more than the market cap - $70-90m.

Druid,

I wasn't around for the painful experience, but I think LGO went after the C-Sands in 2015 and it was ultimately their downfall. Eight wells in 2014 with decent success in 2014, led by GY670, but in 2015 they looked for a more laterally extensive reservoir and the results were poor. Then they went back to the central of the field with GY678 and had mechanical problems, and that was seemingly that for the C-Sands. I don't think it's a further red flag that CEG aren;t going back to it again. https://www.investegate.co.uk/lgo-energy-plc--cerp-/rns/annual-report-and-accounts-and-notice-of-agm/201606091338377701A/

Hi Druid. I have had a bit of trouble following your posts today but let’s see what we can learn from each other.

AFAIK, there’s no contesting that CEG have the Bonasse, Icacos and Cendros areas in the extreme SWP. The have recent PPL (2019-2039) for Bonasse and Cendros, and apparently a pending one for Icacos - perhaps because the second 50% was recently acquired from TXP ( who they may owe a final payment).

TXP have a Lower Cruse to do at Chinook but it’s much shallower and in a different basin. The other two drilling references to the Lower Cruse are:

i) In 2013/14 Range drilled MD248 further east at Morne Diablo. Was a messy well and eventually abandoned with no useful info. https://m.marketscreener.com/quote/stock/STAR-PHOENIX-GROUP-LTD-4001336/news/RANGE-RESOURCES-nbsp-Quarterly-Report-and-Issue-of-Shares-18356352/

ii) UBOT-1 drilled down there in the 50s or 60s at Bonasse. This is the well shown to the deeper extreme (unlabelled) on the cartoon in CEG’s latest presentation. CERP used to say it produced 207bbls.

I find it odd CEG are still using CERP’s cartoon unamended. Apparently CEG did some seismic reprocessing in Q1 over Saffron (according to the end-2020 update RNS). Then there are the results of S1. Is there really no information from either of those that update what they can show/tell us about the Lower Cruse formation?

The company says the full Saffron development would be worth $91m but a few months into that development you think it would be worth $165m, nearly twice full value. If not double or triple that.

deltalo,

You’re plain misleading people now. CEG had $7m before the OO and $17m after. They are meant to receive $3m from the CCNs mid June. That is all entirely spoken for by the $14m of P1 bills, $4m payable to LO and $3m Saffron costs. They may reduce P1 costs to $10m.

They need more money from somewhere. Any reliance on the CCNs ($3m promised and $14m “available” - ie Bizzell will try and find some subscribers) has to come with a massive flashing light warning that the CCNs failed to fund P1 despite equally then being apparently “available”.

I hardly have to smear Leo Koot to make a bearish case. Regardless of what they found in to the lower cruse, he willing sold CERP to BPC for £25m and in doing so swapped his 100% T&T exposure for 24% T&T / 76% P1. That would be explicable if he was also really positive about P1, but of course he bailed out during drilling and for all we know his shares were sold >2p. Given the firsthand experience he had with S1 (by his own interview words, unless he’s a narcissist) he would have been very useful to CEG right now, so I would say he’s let CERP shareholders down especially.

There’s a pretty simple argument that the merger made sense for BPC regardless of whether they thought S2 CoS was 10% or 90%: it brought assets that gave security to the CCN holders. Case in point: without CERP, the P1 cost overruns would have wiped out BPC and everyone - shareholders and note holders - would have lost 100%. With CERP the note holders live on and their £0.5m notes have first call on all the T&T assets. The CCNs were a disappointment at just £3m so far, but without CERP it would likely have been worse. So no - BPC and their advisors weren’t duped, but they were not necessarily highly positive on S2.

Some interesting information in this morning’s RNS:

i) Stephen Bizzell held £351,000 of the convertible notes, about 12% of the £3m issued. I’m very surprised to learn it’s so little. When the notes were first talked about Messrs Bizzell and Carnegie were supposed to be taking 50% each.

(It also looks to me likely that RAB Capital, because they got shares worth exactly a third of £2.5m last week, owned a third of the convertible notes).)

It now appears to me that the Bizzell Capital are basically arrangers of the CCNs: I can’t think the funding is any more secure than them trying to find funders for the CCNs when CEG want to draw down on it. I had assumed Bizzell was himself the majority backer - therefore it is semi-reasonable to suggest £10m is available at 8p from somebody closely associated with Eytan and the co. But frankly there is no way a third party like RAB has given an open ended 8p funding commitment, independent of whether S2 flows 50b/d or 500b/d.

Now it makes more sense to me why the long-promised CCNs failed to deliver for the company in January: they seem like possible financing at best.

ii) Eytan has 10.4m shares. He had 5.9m last month, added 2.4m in the OO and 1m in the placing. That makes 9.3m. Where did he get the extra 1.1m?

Did he own some CCNs and get converted? Or was he a creditor that got some Fee shares? Or did he buy shares in the market? Odd that we haven’t be told.

Perhaps if you are proffering an unqualified option on T&T tax law, going well beyond what the company and Auctus have said - that the tax losses can be sold, you shouldn’t title your post “Key facts.”

Writing things like “constructive feedback welcome” and then responding to a reply with “no more bandwidth - end of” is a bit weird.

FWIW I think the 75% tax offset change merely delays the value of the losses rather than reducing them. If you had $20m profits/yr you could historically shield them for 4.25yrs. Now you can only shield $15m/yr but you’ll still get the $85m shield in 5.66yrs.

Out of interest, what does one do with such penetrating analysis? Do you have a position here?

As I understand it, Saffron and presumably its 30 development well are on the Bonasse licence. An 11mb prospect won’t have a massive areal extent. The other dozen Saffron-like prospects are very possibly spread elsewhere across SWP.

Maybe they can sell SWP oil elsewhere but in terms of pricing I was talking about the existing production. I believe very little of that is SWP: most of it is Goudron, Innis Trinity and South Erin. And the CERP accounts suggest that is sold through Heritage. I also understand it’s heavier oil, hence is would sell at a discount to Brent quality.

Auctus also model a discount on page 2. https://d1ssu070pg2v9i.cloudfront.net/pex/bahamas/2021/04/28113530/Auctus-BPC-27.04.2021.pdf Something like $9 and then narrowing going forward: I presume that is because Saffron oil will be lighter if/as the mix swings towards Saffron the pricing will improve.

And of course 1): CEG is not cash positive, you continue to misrepresent this. They earn $3m from existing production but burn $4m in G&A, which they may reduce to $3m to be breakeven.

Eytan was clear on this in the last UKIM interview. He said the $3m covers their costs in Trindad. That means it doesn’t cover their executives and office in the Bahamas.

Conclusion: sorry if it’s stark but, while you’re entitled to take a positive view on S2, if it’s a failure you have a company with more bills that cash, no ability to turn a profit, and very modest asset value. In my opinion if S2 fails the best that can be hoed for is a rescue raise at 1p.

8). Eytan was, to his credit, quite honest in his Proactive Q&A that these tax losses are tied to specific legacy fields and cannot just be offset against any future profits.

The losses absolutely cannot be stripped and sold to another producer. The law is quite clear. https://rgd.legalaffairs.gov.tt/laws2/Alphabetical_List/lawspdfs/75.04.pdf Page 17, transferred losses cannot be applied, that would be tax avoidance. And rightly so: CERP can throw away $85m if they want, but those losses shouldn’t deny the people of T&T their petroleum profits when someone else profitable does come along.

There is very little tax shield for Saffron. It is held by Columbus Energy Bonasse Limited, incorporated in 2018, which will have very little of its own tax losses.

CEG is, in fact, again back to being a one trick pony: that trick is now Saffron.

To contend with a few points:

10) CERP did indeed achieve a premium to WTI (still a discount to brent) in 2019 but what about since? One of the craziest things here is that we have no useful information more recent than Q4-2019, 18 months ago. Not a production number, certainly not a revenue or profit number.

Touchstone also got a premium to WTI in 2019 but with prices rising in late 2020, that has now swung back to a double-digit-% discount in Q4-2020 and they predict a 14% discount for 2021. https://www.touchstoneexploration.com/wp-content/uploads/2021/03/TXP-MDA-December-31-2020-FINAL.pdf

TRIN are not explicit about discounts but their pricing is very similar to TXP’s. https://secureservercdn.net/198.71.233.41/f01.cc4.myftpupload.com/wp-content/uploads/2021/05/Trinity-Annual-Report-for-2020-released-on-26-May-2021.pdf

There is no good reason to believe CEG isn’t seeing the same pricing dynamics with its oil sales to Heritage. So I absolutely expect a 10%+ discount to Brent in 2021.

I'm surprised there is little discussion of the RNS that RAB Capital has taken a 3% stake.

I make it an investment of £833,000 if they took shares at 3.5p. That seems a very random number until you realise it's exactly one-third of £2.5m.

Page 67 of the OO Circular:

"The date for funding and issue of the £2 million of Convertible Notes previously committed on an unconditional basis and initially intended to be drawn / funded at the end of February 2021 has now been rescheduled to be no later than 14 June 2021 (that is, concurrent with the anticipated completion of the drilling of the Saffron #2 well, but not dependent on the completion or outcome of the Saffron #2 well), as well as now expressed to be conditional on the Fundraising having successfully secured at least £5 million;"

https://d1ssu070pg2v9i.cloudfront.net/pex/bahamas/2021/04/23135622/Open-Offer-Circular-Web.pdf

No sorry, to be honest I think any Placee that got incentivised with warrants would choose the lower their risk by selling the shares at a 10% loss and then run the warrants as a cheap spin on S2. Maybe thats 200-500 million shares.