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Wraith - your strategy makes sense as you are in for the trin segment. I'm in for Morocco and if the drill doesn't find commercial gas that opens Guercifs potential, I'd struggle to buy in or keep holding assuming I held through the drill, as my original valuation estimate for my margin of safety I.e. co2 EOR segment had been flawed, given its no new IP ownership for PRD and PRDs exposure doesn't seem to have sizable revenues / fcf flowing through the contracts imo. Having contracts might not be enough until a clear cash flow/revenue impact can be estimated from the specific contract Imo.
On the other hand if PRD hits gas in Morocco, i'd be buying back in irrespective of the price Ill be selling at or buying at or what the opening price would be post drill results. Today's TXP opening price proved my point again, as have kept an eye on opening prices at TXP after discovery announcements( today it opened up c.12% up). In terms of derisking I'd rather take the full profit pre drill when/if given the opportunity rather than let it be exposed to the exploration risk even after taking the initial stake out. Instead can just buy back in short space of time after the drill results knowing it's derisked and will not be dropping and will be underpinned by the drill prospects. It's hard to be completely out of PRD IMO for long. Even for my current holding its easy to be insecure about the rise thinking is it sustainable or just 10-20% traders driving the volumes pre drill, as haven't seen a new major holdings RNS, or any new major shareholder taking a new big position to give confidence in the rise.
As we've seen on this bb over the past few months - nothing changes sentiment like price.
All IMO and could be wrong so always dyor
Zerba - if you reread the post it says am planning to be out pre drill result completely, but not currently out. No one can catch all moves, it's averaging of those moves that matters. Sellers remorse? So if there was a price drop today it would have been reversed and I'd have holders remorse? I don't want st price rise to justify my flawed analysis regarding my margin of safety, that's the whole point and obviously profit booking.
Can always buy back the offloaded part of the main holding if news changes rather than just the sp. Someone suggested it's hard to buy even 1mn odd shares. I'd disagree, imo in the current PRD market liquidity environment can buy and sell easily although in chunks. Few months ago could only buy 500k easily but couldn't sell even 50k at times. And there are so many mid cap opportunities, I'd be surprised if you think market is overvalued.
All IMO and could be wrong so always dyor
Wacky - had used similar way of valuing trin segment until reread the following part of the RNS and recalled PG mentioning in recent interview regarding not focusing much on bopd. So it all depends on what sort of fee would we charge for co2 EOR service and any profit sharing depending on exclusivity of co2 supply/ costs of co2 injected rather than a bopd/revenue exposure flowing to bottom line as I had modeled. Hence my drill margin of safety which was trin reduced; "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."
Asilad- a rising sp is always good, whether profit booking or holding. Why would anyone be scared about some post on a bb, just think it's all bs if you don't agree and trust your own research. The point of my post was to bounce off my thought process to see if I get good challenges from the actual contributors, and see if I'm analyzing incorrectly or might be missing something. One doesn't have to read posts that might challenge certain assumptions, can always filter posts.
And definitely not looking to increase exposure at £40-45 mn + market cap levels - IMO the time to increase exposure to PRD personally was when PRD was around £13 mn market cap levels few months ago, when the margin of safety was big, with almost all the same major news was known as today, minus the recent placing. Of course unless some other big significant news hits, would stick to current plan of being out completely for a short period before drill result, if not sooner.
So happy with the liquidity momentum going into drill as it's less about derisking more about booking all profits before drill result announcement(and IMO it's usually best to be done in market strength rather than weakness). Higher the sp following weeks and months better for us all. We are at an all time high and almost every current shareholder is in profit, that's a big achievement for PRD and PG alongside us shareholders. Most days would have been lucky to get a buy /sell quote for 200k +! I'm still a huge PRD fan and loyal shareholder but IMO would want solid news to give confidence if the rise is sustainable or just speculators causing volatility based off just charts.
Funnily enough, original plan around £13 mn mcap entry few months ago, was to hold entire PRD holding through the drill, if PRDs mcap was still below £25 mn at spud time. So gladly everything since then is bonus without having to be exposed to drill result, given my margin of safety for trin segment could have covered any Morocco downside from £25 mn mcap levels easily vs today's levels when the margin of safety could be a lot lower based on my research. Everyone chooses their entry and exit points, that's what makes it a market.
All IMO and could be wrong so always dyor
Zebra - you suggested that towards the drill in 3 months sp could double from current levels. I might have missed something but are you referring to any specific news or events that are outstanding that could take us to c. £90mn market cap levels pre drill? Any rise is great news of course
All IMO dyor
MEM - agree with IE potential. Definitely a wild card. Think project rainbow plan has submission deadline of June or July this year. Hence why said PRD has amazing potential and would feel more confident and comfortable with any rise on the back of PRD derisking the drills / prospects and then market recognizing it (as in was with TXP) than maybe other way round? Of course just IMO and others might have different opinion which is what makes a market. Day to day price movements and sp on a given day might be irrelevant to holders who have analyzed the PRD story differently than me. Hopefully the current sp momentum we have carries on for all of us holders as news crystalizes the value proposition that have been estimated here.
And of course everything I shared today could very well be rubbish analysis of PRD on my end, so everyone has to do their own research to gain their own risk adjusted conviction.
Zebra /GRH - apologies, might not have explained it well enough, I meant the %gain from 1p to 10p is same as gain from 10p to £1 irrespective of capital deployed - all obviously depends for us all on derisking of PRDs prospects. Every one has different analysis and different views on what mcap or value is fair, undervalued or otherwise based on with or without drill/other news.
All IMO and could be all wrong so always dyor
Cheers all for your views.
mossma/muckle - I was under the same impression that Trin CO2 EOR project can be valued based on oil bopd revenues. But rereading RNS of 20th Jan. 2021 PRD seems to have clarified that valuation for Trin CO2 EOR segment is on a wide range of metrics rather than standard potential revs/cash flow/EBITDA etc.?!
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. " This might make sense as i think PG suggested in a recent interview to not focus much on bopd production? So that made me reconsider my EBITDA estimated value that I had assigned to Co2 EOR segment, and hence my margin of safety at the back of the business segment reduced. So am not sure what sort of dividend return to estimate at the back of CO2 EOR monetisation, if its not based on mainly oil bopd revenues, but service model?
Cheers Sefton. PRD has great potential, we all know that but point was that market expectation seem to say that PRD is a derisked play, as we compared PRD with TXP. But when I looked back at TXPs production, sp & its mcap pre drill and post drill results in 2020, we seem to have outperformed TXP in terms of mcap, before we've drilled our first well. Our mcap is also higher than SDX & INFA, closest peers I can think of, which goes to show the confidence the market has in PG & team. But given that 60% CoS is management estimate and not 3rd party SLR CPR number, & that my margin of safety Trin segment value estimation based on oil revenues was potentially flawed, and my fair value pre spud has reached, I came to the conclusion to book profit mostly pre drill (don't want exposure to exploration risk as imo market has derisked it without us even drilling). So might be out for a while until assessment of drill results & testing for commerciality has been concluded at Morrocco.
We all know the potential size of prize but have personally realised that, as Sefton refers to psychology, that we tend to think of markets in a linear way which might not be right, to say the least - i.e. draw a straight line from 10p to £1, etc. Inertia/FOMO has cost me previously(who remembers COVID in Jan/early Feb2020?) so might take my rough pre spud fair value target and pay up more and get back in PRD post successful drill/test results. Want PRD to drill and test successfully the commerciality because the size of prize from that point onwards might be massive and so can increase exposure to PRD a lot more than currently.
Zebra - My guess of last weeks c.30% jump was due to ISA reshuffling and MMsgetting people to pay up more for less shares in return. But overall point was that if we estimate, in success case PRDs value is in pounds than in pence, does it matter if someone gets in at 10p, 20p,30p,etc.?
All imo and could all be wrong, and no advice given. So always dyor.
MEM - Have decided to go other way and reduce my PRD holdings going into spud to 10% of the original level, mainly because its hit my target fair value pre-spud market cap of mid £40 mns.
I was always in for Morocco and we know the size of the prize with PRD but IMO market has derisked PRD via the FOMO factor, before PRD has actually done so by drilling and testing a well. With IE, my valuation estimates for these two segments seem too rosy without any actual derisking taking place other than timelines and plans. For Trin assets, my valuation estimate seemed to have a flaw i.e. it can't be valued at EBITDA multiples as suggested in an RNS by PRD, and new contracts have a service value rather than oil producer revenue value.
Most importantly, based on what I've seen multiple times with E&Ps going to drill and awaiting drill results, holding through for drill results have not been as rewarding i.e. the risk-reward has been quite poor. Whenever there has been a successfull drill outcome with a commercial oil or gas discovery from an E&P, the sp has opend up maximum 30% in most cases(depending obviosuly on whether its a very small sub £15mn mcap or a mid cap), while if there has been no commerical discovery, sp has opened down more than 60%+ on average.
Its simple stats I've observed. So would rather pay 30%+ more on the market open, for a successful oil/gas drill result than hold it through to the drill results irrespective of the CoS i.e. that is still a probability thats conditional on a lot of things going right. Plus a successful drill and testing result at PRD derisks a wider acreage so will be happy to pay more than what I'll be selling pre spud for a derisked discovery.
Plus have experienced multiple times with micro caps these round trips from loss to big profit to back to loss, hence trying to avoid it if I can. Of course, PRD is different but my margin of safety was big at c. 15-20mn market cap levels with other two business segments covering a good part of that mcap, but can't say that with confidence at mid £40mn levels, unless a lot more derisking news comes out at all 3 segments. A 100% rise from current c.£42mn mcap levels will take us to c.£90mn mcap which would IMO definitely would need drill result derisking news. Btw comparison with 88e is strange, as 88E might very well have a oil discovery with PANR prospects extending into their acreage, aside their current drill program.
The fact is, can always buy back if a significant derisking event takes place given all the research done.
All imo and could be wrong and no advice given. So always dyor. Reasoned counter opinions welcome from all?
Blissful - There's a gamble everywhere whether exploration, appraisal or development drilling.
Getting back to PRD, someone pointed out on Twitter that the 60% CoS is actually management estimate and not third party SLR CPR estimate. The 3rd party SLR estimate CoS is actually 34%!
Do we know why SLR didn't include any of the zones and prospects that PG is quite confident about? Surely a 3rd party estimate of CoS would hold more weight for different zones? Any guesses how SLR have predicted pre drill for other companies- think they did cover another prospect for pathfinder cpr apart from Guercif? Someone did share here recently some info on pathfinder CPRs prospects by SLR - did SLRs assessment of the prospect result in a discovery?
All IMO dyor
At 16.5p - Market cap of c. £42 mn at full c.257 million shares in issue. Few months ago we were lingering at £12 mn market cap!
Oilriches- I think we need to also estimate the current cash position and what the cash burn rate would be till our first drill. Investing dot com website says the results are due in next week. So we might get an idea on what the current cash position is and the burn rate. Recent interview didn't give much info in terms of ongoing farm-outs? We are now just waiting for the first drill prep news which is more than a year away if no new farm-outs arrive?
All IMO and could be wrong so always dyor
Agree GRH. The prize is huge. All we need now is the drill to get done and come out successfully as PG expects. TXP has drilled a lot of wells and derisked quite a bit of their acreage while we are at the start line, and surely we've got more eyes on us than TXP did at the their first few wells!. It will be interesting to see what sort of wider drill program does PG puts in place if our first drill is successful.
All IMO and could be wrong so always dyor
Crusty et al- Is the early 2022 appraisal drilling confirmed or is it contingent on the 3D seismic and it's processing results? And if seismic acquisition is completed in the 3rd quarter '21 and is processed in a quarter or two, would it possibly mean drill might be pushed back from early 2022 guidance depending on seismic results?
"The joint venture partners agree that the acquisition of a high-resolution 3D seismic survey is of primary importance for the preparation of the Field Development Plan. The new seismic will also deliver information that will be helpful in the final planning of the Chikumbi-1 well and the location of any subsequent development wells"
Couldn't find Aex current cash position, but does the carry goes down to $30 mn after the $5mn draw down from Ara and any views on if Aex would require capital for the next year until drill?
Cheers all IMO dyor
Soundreason- what transformational news do you refer to? Is there any exploration that sou is planning to derisk the high potential prospects?
Cheers
NH - there's nothing wrong with derisking if you have been early to spot the PRD opportunity. But sharing that info doesn't help anyone and is of no +ve value add to the bb. Unless something has changed wrt PRDs prospects derisking can be just a way of hedging your bets.
And we all know that if when, as you suggested, the punt to investment threshold is crossed post Morocco drill, chances are that for your derisked amount, you might get half or less than half of the shares you derisked yesterday. A lot would be piling in given the significant wider derisking of Guercif.
Curious to hear, where did you redeploy cap from PRD?
All IMO and could be wrong so always dyor
Spawny - did look at uog and others like Aex,oex,copl,etc. but value creation story does not seem exciting especially without low risk drill bit. With lack of monetization routes for any discoveries apart from self development with a lot of capital needed and no major management shareholders who would be aligned to shareholders, most of these seem just p&ds with no real value stories.
There might be some who are producers but with production and cash flow you have to hold for years for managements to execute. Look at trin and some other micro cap producers as well, and you will see their upside to market cap are fractional to what PRD offers here, that too at only 1/3 of the business offering. There's very few small 2-3kbpd producers who can do something big like Sqz did without an exploration play.
All IMO and could be wrong so always dyor
88e has kept on with its track record. Charlie was a sure shot appraisal well!?
Take a look at PRD instead. It's got a low risk high impact TCF scale gas drill coming up in the next few months onshore Morocco. PRDs CEO compared it's prospects to TXPs gas discoveries.
All IMO and could be wrong so always dyor
Might see capital flow to other exploration plays. Hard to see any high value low risk, oil/gas play other than PRD.
All IMO dyor
And parallels to Rharb basin can be seen with appointment of the drilling manager in the Feb 25, 2020 RNS by PRD for Guercif.
"Critically Ms. Scott has relevant and practical experience, through SDX Energy's 2014 drilling programme in the Rharb Basin, of the drilling conditions likely to be encountered in the geologically analogous, much larger gas targets, which are the subject of the Company's Guercif drilling programme.
Paul Griffiths, CEO of Predator Oil & Gas Holdings Plc said:
"The Company is delighted to have attracted someone of Moyra's exceptional calibre and experience to manage its drilling operations. It further demonstrates the attractiveness of the value proposition the Company is developing at Guercif and the potential seen by others for "running room" based on a successful drilling campaign. Logistical planning has commenced and well services are being sourced. Moyra's specific experience in this area of Morocco allows the Company to confidently plan and execute its drilling operations both cost-effectively and in a manner that maximises the chance of success whilst minimising operational risks."
All IMO dyor
Don't think Morocco has had a recent gas resource sale so best read through might be valuations from Sdx resource numbers as they are onshore Morocco and a lot of similarities between type of reservoirs, development scenarios, infrastructure, etc.
PRD also has ConocoPhillips as a semi major next door and PG has already suggested that they could come knocking if there's a sizable resource available to be exploited right next to their license. The gas to power market has a big advantage for a semi major along side European exports, although onshore market has great realized gas prices to focus on before thinking about exporting. Then there is sou but not sure what value monetization activity they are undertaking whether via cash flows or outright sale? Think in recent history, sou, at one point hit £1bn + market cap based on Morocco prospects excitement?!
But there has been recent gas acquisitions in Africa by Savannah energy and Cairn energy which might give you some rough pointers? Although Morocco will have a jurisdiction risk premium compared to their acquisition jurisdictions given relative stability of investment climate in Morocco and also much higher realized prices etc. So quite tricky to do a like for like comparison of non Moroccan gas transactions.
All IMO dyor
91- if you assume sdx with its 6 Bcf sized discoveries has a 2020 broker valuation of more than $7 million per BCF, you would also need to take into account other aspects such as the 10 year tax free period in Morocco for the producers, etc. To get a "for sale " estimate
PRD commissioned the recent gas development study and I think that should give you a good estimate;
"Scoping annual gross undiscounted potential revenues of US$26.3 million (US$19.7 million net the Company's 75% working interest) for 3.65 BCF of gross annual gas production would support a potential commercial development in an MOU-1 success case and provide multiples of the development capital requirements necessary to attract reserves-based lending. For a 10 year pilot project life, total gross gas resources required are 36.5 BCF. For the first 10.6 BCF of net gas production no government royalties are payable and there is no liability for corporation tax until 10 years have elapsed."
The above shows that a 36 BCF sized resource is commercial. And for that 36 BCF, PRD gets net c.$20mn revenues per year at 10% production rate per year. So for 10 years production of 3.6 BCF per year gives PRD net revenues of $200 million over the 10 year period. Of course it could be front loaded with yearly production doubling and pulling that value forward to 5 year net PRD revenues of $200 million.
Then as you scale that NPV expands exponentially showing the SLR estimates of $1bn + for range of resource base.
It all comes down to what sort of deal PRD gets for the 36 BCF or 300 BCF + resource. As more the resource and path to monetization of that resource is derisked, PRD gets bigger chunk. Different scenarios can be played out and almost all scenarios have valuation multiples of current market cap of PRD. And that's only for Morocco business segment.
All IMO dyor