We would love to hear your thoughts about our site and services, please take our survey here.
I would suggest 1,000-1,500boepd initial production before decline to steady state.
If they can prove this, it's a big win for the project.
Cash
Spudz,
Hi. I was also invested when Jethro and Joe were discovered. Reality is they were heavy oil discoveries with impurities and not very large.
The key will be to farmout to a midcap or major for the Cretaceous age prospects. Really wish they could get Exxon or Chevron involved here. They have the most geological knowledge of the area from Stabroek into Orinduik.
Guyana aside, the action is all happening in Namibia. Rhino resources released first images of GALP and Sintana's Mopane oilfield (currently drilling the appraisal well Mopane X2). Rhino is a private operator close to the boundary with overlapping 3D seismic. Mopane field is big, approx 430-450km2 thus far . Venus is 650km2.
Gil needs to pull his finger out and conclude a deal on 3B/4B. It has larger outline prospects than most in Namibia - with the exception of the Saturn Superfan.
More worrying is they continue to plan to drill more wells, probably tap up shareholders for more money at some point. But have not been able to flow a single well. Paul needs to ditch anymore drilling until they have achieved flow. Becoming a bit of a white elephant here.
So they've drilled Mopane X1 and got two 'significant' light oil columns. They are now moving about 5-6miles West/southwest to X2 location. Which they thought was the better of the two prospects.
I'll stick my neckout and say they'll be achieving numbers to the upper end of the 'JV-estimated mean 10bln bbl OIP'. Not only that - the remaining Upper Cretaceous prospects on the license are massively derisked now. Also, the acreage a few miles to the West (PEL90) with Chevron just got alot more interesting - same geology. Sintana will be participating in Chevrons 10well campaign in Q4 this year.
Eco take note, that's how you do a Discovery.
In terms of Namibia focussed smallcaps, my top 3 goes something like this;
1)Sintana Energy (TSX:SEI) - the best collection of minority interests right in the heart of the action in the Namibian Orange basin, with blocks immediately North of Totals Giant Venus Discovery and Shells Graff discovery. Partnered with GALP on PEL83, where it looks like the breakthrough light oil discovery has been made at the large Mopane structure, where drilling is continuing to the deeper target. Volumetrics for this Mopane structure have been announced as 'Estimated Mean 10bln OIP' (it looks at this stage to be very promising). They are also preparing for a planned 10 well campaign with Chevron nextdoor in PEL 90 (immediately North of Totals Venus Discovery block) and likely later this year with Woodside Petroleum at PEL 87 aswell. This stock is the safest bet on account of the superb quality of partners operators they've bagged and spitting distance from Graff and Venus discoveries.
2) ECO Atlantic (LSE:ECO)Great exposure in South African section of the Orange basin (3B/4B). That will get drilled, but they sure are taking their time in bringing a partner (with deeper pockets) on board - it's a huge block so plenty of potential targets, albeit the successful playtypes in Namibia are likely to be priority. I would invest just for that campaign as the Orange basin has become the hottest exploration spot in the world with the scale of the fields very good aswell. They have some really good coverage in the Walvis basin, but again need a larger company to shoulder the costs and drill - so I am going to ignore that (for now). Walvis basin is far from any meaningful breakthroughs as alot of studies and field survey work needs doing - it will come in time. The exposure to Guyana is also excellent if they can partner up there and get a drill campaign going it would be amazing. I really hope they can bag a big player now Tullow and Total/Qatar are out of the picture.
3) Pancontinental (ASX:PCL)A 20% interest in PEL 87 where Woodside have spent $AUD35mln on 3D seismic studies on the 'Saturn SuperFan' structure. Similar in nature to Totals Venus Superfan but much larger aerial extent (2,400km2). They think it's likely to have several targets, some possibly large, and the outside possibility of one Goliath target to rival Venus. Sintana also has a 7.5% carried interest in the Saturn Superfan. But PCL don't really much else going on in the Orange basin beyond this - albeit with other assets in the portfolio. So it's very binary with this one block.
BW Energy - Control Kudu gas field but not a fan of gas or this company. Albeit they have other interests.
TRP/GBP they have some decent ground but nothing else. Very binary and they are limping along from placing to placing. A shame given all the years they've been involved. In the case of GBP, I like the fact management has changed but it would be a punt until some meaningful action is taken. TRP? Forget it. Its a
Anglat,
'Last Golden Block'
What do you mean by this, Last Golden Block in the Orange basin perhaps?
There are many many offshore basins that have barely been touched, but with increasing industry interest and all the signs of vast riches. Globally, too many to name, but keeping the discussion to Namibia, Exxon is all over the Namib basin in the North. At some point they will make a drill decision on that.
Walvis basin is huge and really needs more exploration to understand the subsurface - I personally believe it will have its Orange basin moment. Luderitz the same, albeit on a smaller scale.
Agree Woodster,
'Kistos exited the half year with net debt of €42 million, comprising total cash of €247 million and debt of €289 million. This excludes $45 million of hybrid bonds, that only becomes payable in full or part if the Jotun floating production storage and offloading vessel (FPSO) has offloaded its first cargo by 31 May 2025'
Appreciate that but there is still significant risk. Remember ADV and Peterkin claiming it was a cert because the field had already proven commercial oil production (how could it possibly go wrong etc?).
They need to get this well completed and (if successful) into production. There is a wide range of potential production levels for it. So still many unknowns.
I think it's a fair question to ask also, if it such as good asset, why did they get it for a mere £6mln in drilling and some equity?
https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-stock-buyback-purchases-critics-economic-illiterate-2023-2
Billionaire investor Warren Buffett calls stock buyback critics economically '"illiterate".
I would welcome buybacks and offers (were they forthcoming) for some or all the assets. If the market does not value the production and reserves, plus progressive dividend reasonably, then all options to out value must be considered.
ESG concerns are changing the landscape for many natural resource based investments and how iis see them. That'll impact shareholders and SPs for a longtime yet. The only way to ensure it is countered is buybacks - because the market can completely ignore production and dividends as they have here.
Trading target of 800p for Feb if it holds above 650p
Credit where its due; MS and the Canadian team have definitely delivered for all shareholders. The production, the careful and efficient management of the life-giving assets in Canada, decent management of cash and (in todays announcement) the curtailment to less than $1million North Sea Capex - I'm sure many of us emailed relentlessly and it looks like they've taken onboard shareholders concerns - that's a huge positive for me, I was one who emailed a number of times my concerns about the cash drain that was having.
Re a sale price, never say never - look at SQZ who rejected a 400p plus valuation in the summer from kist to now be valued below 300p on their merger with Tailwind. Your only worth what someone is willing to pay for your assets given prevailing circumstances.
Whilst this maybe worth alot more than 35p - that'll takes years of Capex and assuming lots of operational economic cyclical risk to justify the lofty prices like 60p some talk about on these boards.
I would happily entertain a takeover approach beginning from 40p. As a shareholder, its about return with time factored in.
Tony,
Based on 2023 (average) production projection - an I right in thinking 2022 average will land around 20,300-20,500boepd? With 24,000boepd merely the exit rate? I'm intrigued to understand the decline profile of our wells more.
G G G,
Here's the deal - if they announce the NS segment of the business is to be ended - I will be quite happy to see the annual cost of that (circa £12-13million) go straight to the Divi. Or a mix of different types of distributions.
Let's hope they live upto shareholders expectations.
"There's no point doing something 'permanent' when it does nothing for shareholder wealth, except for those who sell down in the short time frame when the company is buying their own stock"
Hey?
What do you think happens when the stock float dissapears and the company maintains its dividend?
Do you think shareholders end up worse off?
Cutting the Divi payout is not a foregone conclusion. If it's maintained low enough and the float cleaned up, then there is no need to cut it.
Affordability Vs sustainability.
I'll tell you what, if you want a big increase in Divi - let's get them to take a sledgehammer to the NS segment of the business. Cost £12-13million lastyear and was absolutely nothing but a money pit. If we can get that closed-off/ shut-down then I give my blessing for the savings to go straight to dividend payouts.
The Divi is likely to increase simply because it will be distributed over a full year. Buybacks of 5% a year minimum should be considered - it'll make the yield better without taking a sledgehammer to Capex budget. Increasing the Divi materially will lead to unsustainable situation in an eventual downturn - it will be cut as company looks to save on outgoings and that will be like a sledgehammer to the share price.
A company can be leaner and meaner even if non-operational measures are employed. Buybacks are just that - the only measure that is guaranteed to force the situation as it removes the actual stock count, forcing up the returns for remaining income investors. They need to employ it opportunistically to some degree as the market does not value extra production as we can see this year. We have achieved next to no SP uplift for an extra 6,000 boepd & an increase in Divi as Tony points out. Food for thought hey ?
Buybacks are the only true way to force the issue - like a pincer-movement with divi's, they remove excessive stock from float at cheap prices and improve yield all at once. Whilst it means lower production initially - aslong as they maintain production and a little growth, buybacks will do the rest to get it on the right trajectory.
I know this discussion was done to death a week ago, but buybacks at 20p would have immense longterm value. I really believe it's far more efficient now to buyback stock than continue increasing production that the market does not value. They just need to cut the Capex budget back to just a little (5-10%) over the necessary maintenance Capex level. The rest of the funds rather than increasing the Divi over .1425p month, should be pumped into clearing up the stock float. The cheaper these shares get, the better value buybacks deliver this year and every year after. Maintain the monthly payout at .1425p for 12months - with stock bought back and cancelled from the register, that monthly payout starts to go up. That's your Divi increase not just for 1year, but every year after. The beauty of the 'rinse and repeat' drilling model of WC basins is you can plan this and make it effective.
Canetoad,
Under such a scenario - where governments are causing problems with the fiscal environment for oil companies and given the lack of appreciation by the market, buybacks have to be on the table to force the issue. Increased Dividends alone will not resolve the issue or out real value - the market can ignore it longer than most investors can stay solvent. Need longterm solutions if the market is moving away from valuing production properly.
Stas20,
I think it comes down to this; will a significant dividend increase as has been suggested, be sustainable in the longterm?
My thoughts are it will not be sustainable in a downturn which happens every few years. Increasing production will make little difference to that as it will also sell for a lower price.
What do companies do when in a downturn and struggling to hold onto cash? They cut expenditure and also the dividend.
I would much prefer i3e maintain their dividend in the long run with increases where it's reasonable and can be maintained through a downturn. Part of dividend maintenance is buybacks - the very act of buying and cancelling those shares makes every remaining share more valuable, and also increases the key metric of EPS. Ultimately it means less money by the factor of shares cancelled leaving the companies accounts each and every year. That in turn leads to the improvement in the stock as % yield paid out improves. This, without going down the route of having to payout even more which risks cutbacks in the future.
Capex should be a variable - the production can grown at a slower pace. With buybacks, you get the same effect even quicker with lower growth.
And Buybacks are a permanent solution to increase yield as opposed to divi's that are dictated by prevailing economic conditions.