The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
There might be a case to invest but that depends on clarity on MOU-1 and what it might mean for MOU-4. And most importantly visibility on funding required for the drill, assuming the drill is firmed up for later this year. If pg clarifies MOU-1 status then the market will have clarity in pricing and market participants can chose whether to invest or divest imo. Not saying clearly whether MOU-1 has achieved all or some of its objectives leaves market guessing which is worse imo.
We still need confirmation that the partner will approve to drill MOU-4 later in the year and not take too much time with EIAs for it to stretch the drill into next year. So tight timeline I suppose if another drill has to happen in the next 6 months.
All IMO and could be wrong so always dyor
NH- I think the word you are looking for is obfuscation?
Trin info being technical is understandable, not sure why the exploration RNS has to be technical when the result after drill operations completed is more or less binary. Not like a potential farm in partner is going to rush to prd when there has been no mention of any commercially recoverable resources? And how many micro cap E&Ps expect the market participants to head to petrowiki etc. To learn about mud logs, gas types, etc to interpret the RNS? If you can't convince them, confuse them?
Was hoping for prd to make a discovery as it could have opened up a big play with immense upside to sp. But now hard to trust what you read if it's not being communicated in a clear and transparent manner to the market?
All IMO and could be wrong so always dyor
If MOU-1 was successful in any material way, I would expect PG to follow up the RNS via an interview soon, especially given the 40% drop in sp. If market is left to interpret itself just by the tone and lack of reference to commerciality/testing/appraisal in the RNS, then it's a non-commercial result, no amount of reading the CPR and researching how to read mud logs is going to change that MOU-1 result? Let's wait and see if PG does his usual interview to clarify forward plans...
All IMO and could be wrong so always dyor
This is like zebras post all over again. You should read a few threads down, it might help.
What makes you think that MOU-1 has made a discovery at all? Your points are all based on the assumption that MOU-1 has made some sort of discovery. In which case the obvious next step would be testing/appraisal of MOU-1 and notification of commercial discovery to get the $1 million deposit back and most importantly let the market know. If there was a possibility of a discovery(at MOU-1) why would you go to another spot to spend more money to drill another well (MOU-4) when you have a potential discovery /prospect to appraise? You would only go to the next well if this well didn't meet your objective of a commercial discovery?
And not sure where MOU-2, etc. is coming from, if one has been paying attention, after MOU-1 it was always going to be MOU-4 next, in case of any drill.
Let's see if PG decides to do an interview in the coming few days to follow up on the RNS. Else its pretty obvious imo re MOU-1.
All IMO and could be wrong so always dyor
But the RNS has been released without any indication of doubt stating what they have found and what is the next step.
Commercial or not is dependent on if you have a discovery at hand whether oil or gas net pay pay/reservoir? If you don't have a discovery at hand, there is nothing to term commercial or not? Exploration is about discovery, not about the commerciality of the well drilled it's about whether the well discovered a commercially recoverable reserves /resources?
Given the drop in sp and him being the biggest shareholder, we'd have expected PG to rush to calm the market via some interview or clarifying RNS, if MOU-1 well had more material info upcoming? We've not heard anything yet... Exploration imo is pretty binary - you either have a discovery or you don't? And if something is inconclusive, you'd expect that to be communicated to the market clearly?
All IMO and could be wrong so always dyor
"It is clear that we are currently in a state of uncertainty" - not sure the irony is correct. From the RNS there wasn't any uncertainty? Rns extract says;
"Forward plans
The occurrence of good gas shows in MOU-1 with evidence of thermogenic gas migration supports in this part of the Guercif Basin the pre-drill geological interpretation for a deep gas "kitchen" connected to shallower reservoirs by large faults."
So pre-drill interpretation is correct for this specific part of the basin for the specific assumption of deep gas "kitchen". What about the pre-drill interpretation of potential gas discovery that could be commercial - that was the whole point MOU-1 well, right? If the well was not a dud why has it not featured in any of the "forward plans " for testing or rigless testing,etc. and why moving directly to Mou4?
MOU-1 well was supposed to be tested and completed as a development well that could be used as part of the development as in the scoping scenario? We already had info from PG regarding every potential discovered BCF being valued and developed via CNG route, via virtual pipeline etc.? None of those "potentially transformational" bits in the forward plans until the end of the year ?
Is PG the type of CEO who would hold back any potential good news?
All IMO and could be wrong so always dyor
NH- Anyone who read the CPR, prds older placing circulars, etc. even before the drill knew there was gas present, probably reason why Market was confident. The CoS 34% estimated by SLR was the only one i focused on, rather than management estimates which can be based on n number of assumptions. Red flag for me was when SLR didn't given any CoS or gcos for any of the other reservoirs/targets especially when SLR refreshed their estimates fairly recently for potential resources.
SLR also did an independent assessment of the MOU-4 prospect I.e. The next drill which was RNSd I think early this year and they have not provided, again, any CoS or Gcos number for MOU-4 neither any commentary on the prospectivity of MOU-4?
I'm not an expert so can't comment on geology aspects but can join the overall dots a bit. In PGs words, MOU-1 was to be a transformational well which, with a discovery, would have derisked the MOU-4 well. With SLR not even going into the same amount of detail in their MOU-4 assessment as they did for MOU-1, leaves a few dots to join.
All IMO and could be wrong so always dyor
Yes but alternatively, the tweet implies that don't look at the bad news out of Morocco drill and it's impact on sp, we have other businesses as well. Which frankly don't come anywhere close to what Morocco MOU-1 drill could /would have done in terms value/sp drivers.
Now potentially more capital needed to fund the next drill alongside the ongoing funding requirements of other two segments, it's a matter of time prd clarifies it's funding position and when the next raise could be. PG raised a lot of expectations with comments like "very very very confident " about MOU-1. Not sure that's the definition of under promise and over deliver?
All IMO and could be wrong so always dyor
Why is prd Twitter account only tweeting malcys this quote ;
"There is much going on across the board at Predator and not just in Morocco, I am happy to continue to keep the company in the Bucket List" #PRD
Prd could have quote tweeted malcys comment regarding fall in sp or upcoming info on well? Are they now trying to say that forget Morocco we have other businesses as well? This reading between the lines is definitely not helping anyone...
All IMO and could be wrong so always dyor
Zebra - you still don't seem to be convinced what the aim of MOU-1 well was vs what moving directly to Mou4 implies.
This extract from the Mar Scoping study should help you with it. It's not about 700m of gas shows but is it recoverable commercially (puddle vs scattered droplets?) especially as PG mentioned in the development scenario planning report the following;
"In accordance with the Company's strategy to fast-track monetisation of an initial potential gas discovery at MOU-1 for the Moroccan industrial market, SLR Consulting Ltd, petroleum engineers and oil and gas advisors, were commissioned to develop a high level scheme for the transport of dry gas from the Guercif well site to existing reception facilities via a CNG "virtual pipeline".
Given that there was no "initial potential gas discovery at MOU-1" given we are moving to Mou4. MOU-1 was the most commercially attractive prospect given its closest to the pipeline and infrastructure alongside cos. Is MOU-4 going to be commercial enough to apply the MOU-1 scoping development study?
To derisk and sell the license you need to first prove the license has commercially recoverable amounts of gas. I suppose not going ahead with MOU-4 might have meant handing the license back? And I've shared re T&t and Ie already - it's nothing more than £12mn to market cap imo.
All IMO and could be wrong so always dyor
The aim of MOU-1 well was not to lay groundwork for MOU4, it was to prove a commercial discovery - a discovery confirming (possible reserves/resources in place) that were estimated pre drill via excel/desktop studies etc. You want to drill to see if your pre drill expectation of a commercial discovery with minimum 32 BCF holds true, which might mean a viable development option that could help to commercialize the find as prd undertook the development options study.
Everyone who actually read pre- drill the Pathfinder CPR and the Fastnet docs, GRF-1, msd-1 well analysis knew that gas existed in the prospect. It was just not known if it's placed in a commercially sizable and recoverable way and that's what the MOU-1 well was exploring for. Saying that gas shows were observed in mou1 well isn't a new insight or information, if one has been paying attention all along.
Another drill means another raise might be required possibly 10% of issue depending on sp at the time?. Would today's news hasten prds move to AIM? If prd moved to AIM, pretty sure spreads would worsen a lot as the standard listing MMs move on.
All IMO and could be wrong so always dyor
This comment in the recent use of placing proceeds section shows the confidence PG had in Mou 1 well and what not having to test means for MOU-1.
"enable long lead items necessary for a potential well testing programme to be pre-purchased and available at the well site ahead of drilling and also to provide a contingency for well completion and testing;"
All IMO
Hasiba - it's not whats mentioned in the RNS. It's what is missing from it that has caused the drop. Missing words like "pleased", "discovery", "commercial", "testing", "appraisal" gave the hint to the market and left it to decide for itself. Hence the drop was -40% and not -70% like zebra suggested.
All IMO
Zebra - I think the confusion was obvious before the market opened when so many posters were convinced it was a good result, and guess MMs too were confused? Maybe every one is used to reading words like P & A or disappointed etc. In duster RNS'. Since PG didn't use any such words most PIs weren't sure what to make of it? Some are still not convinced so are starting to read the CPR "after" the update has been released on the drill. Would have expected them to read CPR before holding through the drill bit.
Regarding your point around whether it's a duster or not, this bit from prds website might help re Grf-1 which had 100 meters of gas pay ;
"An off-set well, GRF-1 drilled in 1972 before the acquisition of the 2003 ONAREP seismic, less than 1.5 kilometres to the south-east of the edge of the seismic amplitude anomaly, had minor dry gas shows in the Tertiary. The previous operator, TransAtlantic Petroleum, re-evaluated in 2006 the wire line logs from GRF-1 and interpreted gas pays between 1,860 and 1,960 meters below ground level in the basal Tertiary section. No corresponding gas shows were seen on mud logs when the well was originally drilled and the well has never been tested to determine whether this interval is indeed gas-bearing."
So the last line says, testing would have shown if it was gas bearing, and since PG didn't mention anything about testing (or rig less testing) of MOU-1, my interpretation is MOU-1 has gone the same way as Grf-1 I.e.non-commercial. And strangely, PG had mentioned that MOU-1 well will help derisking MOU 4 prospect but now not sure how MOU-1 will affect prospectivity and chance of success for Mou4 given Mou1 wouldn't be tested.
Not sure how long EIA would take for MOU4, any idea how long it took for Mou1 EIA to be approved? If partner says need full EIA for the new location, don't think prd will be able to drill Mou4 this year?
All IMO and could be wrong so always dyor
Imo market cap above £40 mn (way above sdx) was saying that the market is convinced MOU-1 is going to be some sort of commercial discovery. Even prds (potentially wasted?) analysis into development scenario planning at different Moroccan gas prices and reserves convinced the market participants about the level of confidence the management has in the drill bit before it's been drilled. Around £12 million market cap, 6 months ago would have been a good risk reward to hold for drill, but after the big hype and two capital raises, the upside was limited but many chose to ignore even when they were in big profits.
Selling (realizing profit) is when you actually make money in the market, and not just buying and holding all through, irrespective of news/developments. So many have round tripped from loss to profit and back to loss in these micro caps, so always good to have an eye out on the door.
Does anyone know if MOU-1 was supposed to derisk MOU 4? Is there a read accross from MOU-1 to Mou 4 drill?
All IMO and could be wrong so always dyor
Hope "choir" members at least took some off the table, as PG recommended, while it was still there. Exploration always has big risk irrespective of probability calculations, CoS and Drill assessment such as being "very, very, very confident". They sadly don't always go hand in hand with the commerciality needed for a gas discovery.
Could this gas shows constitute a discovery to get at least the $1 mn deposit back or was it just for commercial discovery?
All IMO and could be wrong so always dyor
Gas was always present even in the GRF-1 offset well logs. But prd was looking for commercial gas discovery at MOU-1. PG obviously didn't use the word commercial to describe this well. It's not always about what is said in the RNS, it's also about what is not said. Surely if it was a positive result, a -40% drop in the sp would justify prd clarifying the fist RNS. Given the drop in sp and prd not clarifying whether the result , I think it's straightforward to guess that it was possibly a non-commercial gas discovery?
All IMO and could be wrong so always dyor
"Forward plans" seems to be proposing to the partner that another well needs drilling. So the next drill is not confirmed as the 25% partner assesses the results of MOU-1 and then decides if Mou 4 needs Going ahead. Don't think prd alone can decide if next well drilling can be done as I suppose the 25% holder is also footing it's share of bills?
And looks like borehole had issues "Wireline logs will require detailed interpretation to take into account borehole conditions caused by borehole enlargement where washouts have occurred in the open-hole section."
All IMO and could be wrong so always dyor
It's called recency bias. And possibly there's a lot of holders from below 3p-4p levels who are still in a lot of profit - it's all about who is going to take it off the table first. As I mentioned previously round trips are pretty common with E&P micro caps.
Who were the lucky few who got 14p first thing in the morning?
Next step might need more capital for next drill and given that prd is standard listed and not AIM, discounts for recent raises have been large. It's telling PG didn't mention anything about the MOU-1 in his commentary apart from gas shows which I think was pretty evident in GRF-1 well wire logs? PG gave a big hint in the video interview which made me offload above 15p levels - he said after raising at 10p that when there is money on the table take it or it might not be there when you might need it.
All IMO and could be wrong so always dyor
To say the least...