The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
55% CoS is as good as it gets. Shell usually doesn't take exploration risk unless they know it could be play opening. Half of delt market cap is cash and other 25% is shell carry. Big margin of safety until 2.5p imo.
All IMO and could be wrong so always dyor
If we hit big at Guercif and if it's clear that it's going to need a big drilling campaign to prove up the full extent of the resource, then that target price will have to be adjusted way upwards as we have 75% stake.
All IMO and could be wrong so always dyor
The question was because there is another way to interpret sdx RNS. From their past Morocco ops updates, their exploration seems to have usually been a bit longer than they originally planned and in case sdx ops again get extended from their expected July completion time to let's say August and given that they have the rig booked back for them from Sep / Oct time, the window for moving the rig across and drilling gets very tight for us. Let's hope they don't end up taking the rig through sep Oct which might mean we might have to wait to drill after sdx completes their part one and two drill program together?
I guess it all comes down to commerciality and costs associated of the rig move from sdx to us and back to them and the time consumed between moves. If the rig provider /sdx and prd could deem the cost and time duration for a single drill is not worth going back and forth because of this new delay, and so we end up drilling our well at the end rather than in between the sdx booking slots given delays, I.e. Oct + assuming no more covid restrictions? Is it possible at all to modify the rig contract, as we are drilling one firm well currently while sdx seems to have a firm 5 well drill program, could our well get pushed back if the rig provider and sdx decide it might be more cost effective for them given a minor delay from Aug to Oct time? Maybe we need to wait for correct firmed up drill information from pg which I suppose might be a bit later into sdxs current drill program, rather than simple RNS calendar interpretations.
All IMO and could be wrong so always dyor
The placing RNS said "Timing of the MOU-1 well remains on track for Q2 202..." Now that sdx is expecting to complete their first part of the program by July would mean our drill results won't be in until later part of Q3 - Sep. Assuming we drill in August? I recall PG mentioning the option of taking the rig again later in the year but sdx seem to have another option locked in after August which would mean our potential follow on plans if there's a discovery will be post November -Dec time? Any views on if this interpretation of timelines from todays sdx RNS looks correct?
Todays sdx RNS says - "The second phase of the Moroccan drilling campaign will commence in September/October 2021. "
All IMO and could be wrong so always dyor
Is that a 2 month delay or 1 month if our drill kicks off in August? Doesn't look like April pad construction was on schedule? A minor delay is not a big deal in grand scheme of things imo.
All IMO and could be wrong so always dyor
Agree cp. That's brilliant news. Nice chunk of cash available now and derisked from he1 at all time highs. They should keep 5-10 mn to hold through drill imo. Cash should be above £3 mn? That can be used for Deals or more importantly seismic and R drill? Aex and scir hold same 25% of R and imo scir should be valued at least half of Aex imo before accounting for he1 stake or other potential deals. Does anyone know what deals the bod would be focusing on - waste to gas will attract a lot of growth opportunities.
All IMO and could be wrong so always dyor
My views towards PRD have not changed. "Prospects " are still good until drilled and results are out. Once results are out of the drill, good or bad, then you can judge how high or low market cap would go from £40 mn mcap levels imo. Btw I came across PRD when someone mentioned it on some other board (SAVEs I think) last year. No one should take any advice from any of my posts and should do their own research. You can get someones idea but you can't get their conviction until you do your own research. So ignore all posts on a bb including mine and dyor, whether for PRD or something else. It's all just views anyway imo.
All IMO and could be wrong so always dyor
Don't think bpc has the upside as PRD does if we hit gas. Same goes for SCIR although scir is a lot behind in terms of pricing it's margin of safety. The main reason PRD has risen over 300% in a few months is due to the lower risk exploration possibility . At 12-15mn market cap levels PRD had a big margin of safety. Of course everyone has different appetite for exploration plays whether to hold through drill or derisk pre drill but IMO it's the exploration value creation possibility is where most upside lies as opposed to production for a minnow. Look at SDX valued at less than PRD even though it's production and cash flow is pretty decent but value creation upside through exploration drill bit is quite low, hence market doesn't find the play exciting enough as growing production for micro caps is a less attractive low risk low reward prospect.
Of course, its all IMO and could be wrong so always dyor
Market cap at a nice level of £40 mn. Looks like the chartists have a buy signal on Twitter. sdx should be out with the update soon about their plan as I think they would be first drilling before it moves across to us.
Off topic - does anyone have any views on other PRD exploration type plays at 10mn-15mn market cap levels? I found one SCIR, got massive margin of safety with He1 stake and gas drill in Tanzania. Hard to buy, and reminds a lot like PRD did at 12 mn market cap levels with big margin of safety. SCIR is a potential green energy play with massive gas drill play - a lot like PRD imo. Any views on other potential low market cap high upside PRD type exploration plays?
All IMO and could be wrong so always dyor
Cp- the margin of safety at scir is massive. c.50% of market cap in cash equivalent of he1 shares. A much better low risk play on he1. Two drills coming up. And would be great if scir could enter waste to gas or biogas sector. Scir reminds a lot of PRD when it was at 12mn mcap levels. Scir is a great play at green energy and gas exploration all at 10mn mcap levels.
All IMO and could be wrong so always dyor
Factcheck - correct. That was before I discovered flaw in my analysis of co2 EOR segment valuation and since then my margin of safety valuation on PRD has gone down in value. And I also realized the flaw in my argument of holding through drill results when market has derisked quite a bit of the drill before we've drilled. And given that any possible upside vs downside moves post drill results from those levels don't give me a good risk reward I decided to change course and accept that I might have been overly optimistic, ignoring negative views and the 400% rise in short span of time when holding full position. So reducing the position gives me a bit more unbiased view of looking at the position. I still agree PRD is a great opportunity but will wait until drill results before getting the same position if not more.
Ind- please share your strategy. It's just my view and of course could be wrong. Based on your experience of other oil gas drill.explorers what has been the average opening percentage price for the first 5 min after a successful commercial payload discovery RNS and what has been the downside opening for a failed drill RNS? Would be good to have some stats imo
Please share your research and strategies?
All IMO and could be wrong so always dyor
NH- would disagree regarding the farm down. A big player wouldn't come in until sizable resources are proven. Sdx might jump in to take a slice and fund a drill program given the synergies but can't see the likes of COP jumping in immediately off the back of MOU-1 unless its a resounding and sizable success. PG is very confident of the drill and in a way PRDs rise of over 400% over the last few months is basically pricing in that confidence imo. I'd rather be in PRD before that confidence was priced in than once it's been priced in because if theres a disappointment (which no one believes as PG is super confident) the market would not be pleased to say the least. If MOU-1 is a success we might open up 30% to 50% but if it's a failure then 70% drop is possible given what we've seen with other exploration plays who have priced in a good percentage of success pre drill imo.
Hence why decided to book full profits going into drill and will be aiming to get out fully on another attempt at 15p + levels. As a play opening drill always has risks attached to it and reading about the old offset well issues (some over pressure related issues, etc.) that were encountered at the GRF-1 offset well, reminds us that it's an exploration well after all with risks irrespective of the confidence level. I'd take that risk at a low market cap level rather than from a much higher mcap levels and PRDs market cap currently is similar levels to SDXs which shows the markets confidence in the drill results.
Of course, no advice is given. The above is just my strategy and others have different strategies but always keen to hear what others strategies are? Because if Mou1 is not a success and Morocco gets written off I'll not be buying in even at 3p levels given my valuation estimates for co2 EOR segment.
All IMO and could be wrong so always dyor
Wel - of course, none of my posts are advice for anyone reading them. It's only to generate a debate on the merits or ddmerits on a specific point of view on the co. It's all just opinion that can all be wrong.
Imo no one should trust anything read on bbs unless it's backed by facts or news, everything else is just someones opinion, whether pie in the sky or otherwise projections. Any rise we get in sp should be sustainable and that will be through PRD delivering on its massive potential, and not by what someones views suggest on a bb imo. Progress on the projects will drive and sustain any rises, everything else is just noise. Market can give rises for no reason and can just as well take it back for no reason but value accretive news is what will sustain any rises in sp imo.
All IMO and could be wrong so always dyor
The bb is for sharing opinions on the co. as we all do. Almost every one of us, including myself is going to be wrong in terms of our views on value that PRD will ultimately unlock either on the upside case or downside. Imo the seed of doubt for me was when PG referenced the adage, regarding the sp rise in the interview - if there's money on the table take it else it might not be there when you might need it. So can't fault the holders booking profit above the placing price of 10.5p. Maybe I just read into it too much but why would the sp not be higher in case of a successful drill result unless it's a hedge against the drill results outcome? Hence decided to wait it out for the drill results for full holding. It's all just my view and very well could be wrong and I hope I'm wrong for the sake of my remaining PRD holding and as imo PRD has great potential and even after successful drill results the upside will be massive.
All IMO and could be wrong so always dyor
91- And we are all on the same side as holders and want to see sp rise going into drill hopefully, difference is that I've laid out arguments for why I'm not planning to hold through drill results and will book profits before that. Post successful drill will be piling in irrespective of the price, not before drill results. The whole reason of posting was to get counter arguments as to why it might not be a good risk reward move from proper contributors. Of course my analysis might be completely wrong hence I look for proper counter arguments on here from proper posters in case have to course correct, and not always keen on seeing just the positives of an investment. Posters can always choose to filter out views they don't like or agree with.
All IMO and could be wrong so always dyor
LN - I have been very positive PRD from 12 mn market cap levels. At a much higher level market cap those undervalued discounts have been unwound without much concrete news since that 12 mn level. I didn't want my flawed analysis to be justified hence decided to reduce going into the drill. Was especially worried about the low volume period that has kicked in going into May and second guessing if holders with averages below mine would take their profits before I choose to. Now waiting for the rest to be offloaded if we see another rise up pre drill. Like I said micro caps are known for round trips and as had experienced quite a few, decided to learn from it and book profits at a market cap level that was near or above my fair value with current known news, rather than ending up with a could have, would have, should have mindset.
Of course I could be wrong with new news flow but don't want to see much gains evaporate as others choose to take their profit pre drill and run with it on low volume days, and as all exploration have risk and the upside opening price on a successful drill results can be very small compared to downside moves on unsuccessful drill results so thought risk reward at those market cap levels were not in my favor. As to sustain and build on any sizable rise we need sizable news and can't see any sizable news apart from drill results imo.
All IMO and could be wrong so always dyor
20th Jan 2021 RNS states - "The successful development of the CO2 EOR business in Trinidad allows the business to be valued on the basis of its assets, invested project costs, existing contracts, goodwill and CO2 EOR operational experience."
Strangely this doesn't seem to mention any specific valuation metrics but a range. Service fee and profit sharing seems to be the model but hard to see struggling oil producers part way with big profit margins. Things might clear up if we see the details of a contract.
All IMO and could be wrong so always dyor
Agree, it's hard to value co2 EOR segment but my view changed recently in terms of how much value to be attributed to the segment in terms of the market cap. Hard to find any co2 EOR business M&A but found one which is not same but roughly gives a ball park value to co2 EOR fields of $12 mn. Of course it's not exactly like for like but gives a rough idea of EOR projects /fields value commanded in market. Obviously need to adjust the price for individual project and offering of surface facilities etc.
My guess is, even if in a worse case scenario Morocco and IE value turns out nil/negligible, the co2 EOR sale might get a sale value of £8- £10 mn giving a 100% return on PGs invested capital hypothetically. Of course it's just estimates and can be completely wrong but simplistically basing it off the below deal.
"Denbury to Acquire Wyoming CO2 Enhanced Oil Recovery (EOR) Fields"
"The purchase price includes associated surface facilities and the 46-mile CO2 transportation pipeline to the acquired fields."
https://www.globenewswire.com/news-release/2020/12/29/2151223/0/en/Denbury-to-Acquire-Wyoming-CO2-Enhanced-Oil-Recovery-EOR-Fields.html
All IMO and could be wrong so always dyor
P.s. Imo Value for PG from his holding might be quite different because PRD was originally listed at c. £3 mn market cap back in May 2018. And Jan 2019 presentation shows PG having a 44% shareholding at a market cap of £6.6 mn. While his current share holding is c.20% guess because of capital raises along the way.
So PGs current stake of 20% shareholding will be worth a lot more than back in 2019 when it was at 44%, even at a £20 mn market cap level imo.
Simple math 44% of £6.6 mn market cap = £ 2.9 mn
20% of £20 mn market cap = £4 mn
Of course PRD has progressed a lot more with Morocco etc. Thats reflected in higher market cap than back then imo. But does give an idea about entry values for PG and evolution of market cap since then.
All IMO and could be wrong so always dyor
There is definitely value but imo it's mostly in scaling up with a lot of contracts as it's a service fee model. And we are yet to see our first contract but assuming we get enough pricing details of the first service contract it might give a good indication of the value revision to my estimates. Hard to imagine an oil producer /operator giving much of their EOR revenues /margins off to a service provider with ever volatile oil prices. There is always a possibility that they could take just a yearly contract with PRD and replicate it in house once a framework is setup on their end, as we don't seem to have a unique IP for EOR. Of course value will be dependent on if we sell the segment to a producer directly or go via a service route. Imo majority of value in PRD is in proving up Morocco via the drill results.
All IMO and could be wrong so always dyor