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Final Investment Decision on whether to extract gas from Anchois (or not).

Between now and then, it is ENOG that needs to spend the money on Anchois to get to that point, not Chariot.

Licence commitments are part of any acreage. If licence stake holders don't carry out agreed commitments by a certain date, then they forfeit on the licence commitment(s) and their licence stake is in jeopardy of being recalled. Licence extensions are often granted if the licence holders show a genuine intent on progressing the licence, but if there's no intent by the stake holder to progress the licence commitments they made, then the stake holders licence will either lapse, or be voluntarily handed back. We don't know what the licence commitment is for FID, but based on Chariot's timeline for FID (Q2 2025), I'd guess at it being somewhere around 18 months from the signing of the deal (December 2023).

If you find it such a waste of time, why are you here reading & posting?

Surfit,

Which also suggests Chariot receive $15m at the point of FID, regardless.

Chariot will receive:

o US$10 million payable on completion of the transaction

o US$15 million payable on Final Investment Decision ("FID")

o US$85 million gross carry including:

§ All Lixus costs up to FID, including the additional Anchois well with a gas flow test

§ Planned Rissana seismic acquisition costs separately capped at US$7 million

Surfit,

In exchange for the 45% stake they were given, ENOG had to commit to quite a lot. There is the separately specified $7m allocated for seismic in the partnership agreement, as well as up to $85m on drilling, $10m on signing, $15m on FID, plus all Lixus costs up to FID. So far, they have only spent a fraction of this.

I think the only way ENOG could not proceed with the seismic program, is if they were to hand back their stake in the licence to Chariot under not fulfilled commitments.

The terms and wording of the deal in relation the above commitments are also quite clear "Chariot will receive". There's not much ambiguity in the statement of the deal Chariot made with ENOG, if the above commitments were based on certain scenarios playing out one way or the other, I think it would read more like 'on attaining certain milestones Chariot will receive' or 'on meeting certain conditions Chariot will receive'.

Starbanker,

CHAR & ONHYM would have to agree to any such sale to a 3rd party and obviously, that sale would need to come with conditions i.e. a drill program and commitment of capital etc.

There are probably a handful of differing options they could take.

Another option could be they only think the project worthwhile if they had a 75% stake, in which case they would have to make an offer for all of Chariot's stake. Or maybe, after interpreting drill results, they decide to spend the $7m on a seismic program. At the moment, none of us know what the next step Re Anchois will be, we're all in the dark, hence the dismal share price.

Currently ENOG are operator and the largest stake holder in Anchois (though important to note: they are not majority stakeholder) at 45%.

Chariot 30%

ONHYM 25%

Whatever decision is made on if/how to proceed with Anchois, it will have to be a group decision.

Of course, out of the 3 entities, ENOG are the ones with the cash and the experience needed to lay the pipes, but with 45% stake/vote, they aren't going to be able to make any unilateral decision on Anchois, other than to declare themselves out - which I imagine would mean handing their 45% stake in the licence back to Chariot.

Chariot will either need to get a full carried partner (hinted at), or flip the licence for a profit.

Namibia offshore acerage contains the biggest oil find in a decade, which makes it hot property and thus valuable. Chariot has oodles of 2&3D seismic data offshore Namibia, which again, has value.

Surety,

I think it would be difficult to find one buyer who would want all of these assets.

One of the main reasons (other than the poor performing BoDs) for lack of market interest in Chariot, is its lack of focus on what it's trying to become. Currently, Char is a mis-mash of different projects with neither one receiving adequate funding.

I pity those who receive pleasure from the pain or suffering of others, it says a lot about them (none of it good).

Most thought the A3 drill was going to be a formality, it was certainly sold that way by Chariot's BoD. Unfortunately, the partnership drilled in the wrong location. There is a lot of gas in Anchois, no doubt about that, but it's going to take longer to find >Tcf than investors hoped. If gas had been found, the cash position wouldn't be anywhere near as worrying.

I did a bit of research into the renewables space on Friday and there is a great deal of M&A going on in that space at the moment. Neoen as previously mentioned, but also Saeta, NuStar Energy, Gas Combined Cycles and Wind Projects, Terna Energy, Eshkol Power Plant have all been bought out.

Drilling for hydrocarbons is very capital intensive and due to the nature of drilling, cash needs to be spent in huge lumps. Renewables on the otherhand, can have a gradual and forseeable rate of cash spend (as well as income generation). You know what a solar field will cost to build, how long it will take to build, and what the customer is willing to pay for the end product (electricity).

Instead of looking to sell part or all of the renewables business, maybe the BoDs should look into selling off all of their hydrocarbon assets instead and venturing forward as a pureplay full-cycle electricity/utility company focused on South Africa instead?

Chariot's renewables business has a pipeline of 515MW of power under development with only 5% of it built todate. They are spending a paltry $0.5m per year on building this infrastructure, which is why progress has been slow. Without the huge layouts of cash that O&G exploration takes, spending on building out the renewables business could be accelerated. More importantly, the 515MW of power Chariot has under development already has customers waiting to buy it. Probably why Chariot report multiple expressions of interest from South African investors to fund it.

Looking at the recent M&A deals, a relatively conservative valuation for 515MW of renewable power would be $330m.

In the Anchois deal with ENOG, Chariot were to receive $65 million in exchange for another 10% stake and would receive 20% of whatever Anchois made. If Chariot were to receive a similar amount of cash and retain no stake in Anchois, then maybe this would benefit both parties moving forward. ENOG could develop Anchois as 75% operator and Chariot could fund the build-out of their renewables business.

Just a few thoughts...

Clearly A3 was unsuccessful.

A2 on the otherhand...

https://www.lse.co.uk/rns/CHAR/significant-gas-discovery-at-anchois-2-well-48u1uzso08evoo4.html

Fernan,

i don't believe cash burn will be anywhere near that high now that the Anchois drill has been completed.

Agree with you on the idiotic strategy of them spreading the company too wide and too thin for too long.

However, the one positive thing that may have come out of this idiotic strategy, is the stumbling across a massive opportunity in the South African electricity market... Right place at the right time kinda thing...

Starbanker,

For me it didn't read quite like that. I think they will wait until the recent well analysis is complete and then conduct a reinterpretation of the seismic data. The B sands clearly have good seals and good porosity and most importantly, contain gas, the burning question; are there enough sections of these B sands to make a development worthwhile? And if it is worthwhile, is it better for Chariot to sell it or stick with it?

It's a wait-and-see.

Interestingly, it's currently only taking approximately $500k per year in investment for Chariot to build out the renewables business. This could be scaled up massively, providing a decision is made to divest and focus in this area, which it looks like it is. One of the few things AP seems to be good at, is making deals in Africa and there are lots of deals to be made Re: creating and selling electricity in South Africa.

Over the last few years, solar has become the cheapest way to produce electricity, cheaper even than coal or gas.

https://www.wtsenergy.com/solar-cheapest-energy-source-in-history-factor/

Next RNS needs to be the sale of some non-core assets and divestment away from pipedreams they can ill-afford to pursue.

A glimmer of hope...?

'Clearly the results were below expectations but Chariot still believes the Anchois field and the surrounding licence areas have a lot of potential. Post well analysis is underway and we will work with our joint venture partners to determine the next steps for the project.'

I see they have spent over $60m on exploration and evaluation of assets and most of that must have been on Anchois. They have an enormous amount of data on this asset and with the latest drill I think they will be able to map the entire extent of the B sands which we know have good reservoirs, with good seals and great porosity. Could it still make a viable project with relatively shallow drilling in the thickest sections of B sands?

Duncan Wallace on Loukos 3 months ago

https://www.youtube.com/watch?v=yyhgivmNimE&ab_channel=ProactiveInvestors

They need a $30m-$50m asset sale really. That would give them some proper funding. Placings aren't going to cut it going forward.

Neoen is a big renewable power (solar & wind) business and it has a 20GW portfolio of renewable power under development, with only 8GW of it currently built. It's being bought out by Brookfield for (€6.1 Billion) $6.6 Billion. If we compare that to Chariot's portfolio, which is much smaller at 515MW or 0.515GW, it is 1/40th the size of Neoen. I'm not saying Chariot's renewable business will be valued at 1/40th the value of Neoen at $165m, just that it should have a decent amount of value ascribed to it (More than the current market cap).

Like I said, I don't care if they divest out of O&G or the renewables business, providing they are able to fund whatever they decide to focus on and stop trying to be all things to all men.

Starbanker,

At a guess, I would put current cash at around $6m.

The Strategic Review of the Transitional Power Division has been going on since March, so interested parties have been engaged for some time, even prior to March.

'Management has been progressing debt and equity financing options at the subsidiary level and has received indications of potential interest from South Africa focused investors to fund the Transitional Power business. Whilst there is no certainty that a funding package will be concluded, management has elected to undertake this review to explore the options available to the Company, which may involve a full or partial sale or demerger of the Transitional Power business or the division remaining part of the Chariot group, with the aim of the strategic review to maximise value for Chariot's shareholders.'

As they are spread too thin.

Shareholders certainly aren't in the mood to accept anymore placings.

With the little cash they have, it's an impossible feat for them to simultaneously work up all of their assets at the same time. Something has to give.

They need to decide what they want to focus their attention on. Do they want to be a O&G company? or do they want to be a renewable energy & trading company? It's a pipedream to believe they can be both, they simply aren't big enough, nor do they have the cash.

So the options are;

Divest away from O&G i) Sell Anchois & Rissana (ENOG?) ii) Sell Loukos once flow tested (Vivo?) iii) Don't pursue Namibia

OR

Divest away from renewables iv) Sell the Mauritanian Hydrogen project (Total?) v) Sell the renewables business.

At the current time, the electricty trading + renewables business would likely command the highest price (either this or selling Anchois to ENOG if it's still viable for production). Anyway, a pipeline of 515MW is not insignificant for a renewables business and the fact that they have a trading licence in South Africa means they (or a new owner) can sell the electricity they produce directly to end users, thereby retaining most of the value right the way through the chain, and if they already have interest (as they say they have) from a consortium of South African investment houses in funding/expanding this business, then I'm sure the interest would remain (maybe even preferred) for an all out purchase of the business.

Their stake in the Mauritania hydrogen project could be sold at a later date.

As a shareholder, I don't particularly mind which path they decide to take, providing they are able to fund themselves in the direction they choose to go in.