Member Info for Fernan10

Hi Jimmy.

This is different.

I was talking regarding the pre selling of gas in the futures market mencioned by BDC.

Regards

BDC:

I don't think CHAR will pre-sell the gas in the futures maket before actually producing it.

If, for any reason, you have some delays getting into first production you will be "short" in gas (you have sold something that you don't have, and hence you will have to cover your position at whatever price).

Very risky in my oppinion.

Regards

The primary objetive for the onshore gas wells doesn't sound exciting.

The first well, if successfull, will unlock a few propects for a total resouce of 26 bcf (gross).

If each individual prospect has, on average, a gross resource of 5 bcf, I expect a flowing rate for each well of around 1-1.5 mmcfd.

Lets hope the secondary target (currently under analysis) becomes more exciting.

Regards

How much of their own money are the "analysts" putting to support their target prices?

Their "educated" oppinions don't have any importance at all

Hi Jimmy.

Historical flow rates in the area are substantially lower than the numbers you provided.

For example, see the results of the LAM-1 well:

------------------

Monday, June 29, 2015

Circle Oil updated its operations on the LAM-1 well on the Lalla Mimouna Permit onshore Morocco. The LAM-1, the first well drilled by Circle on the permit, is targeting the Miocene gas-bearing sands similar to those found on the company’s Sebou Permit.

Total depth for the LAM-1 was reached on May 26, with prospective gas zones logged and a completion string installed. The well was tested using a slick-line unit. The primary target was perforated at 1,261-1,272 meters and flowed gas at a stabilized rate of 1.9 Mmscf/d and the secondary target was perforated at 1,181-1,183 meters MD and flowed at a stabilized rate of 1.1 Mmscf/d.

This is not an MOU. This is a Partnership agreement.

Agreement: A properly executed and legally binding contract (thefreedictionary.com)

A properly executed and legally binding contract.

Hi Jimmy.

I was about to write to you in relation to Anchois´s future production levels, when you stated the following:

"The anchois development is now looking at producing 200 mmcf per day from 3 production wells."

"The average production rate onshore from thin sands is 1.1 mmcf per day per meter. Anchois 1 has 50 meters, anchois 2 has 150 meters and anchois 3, which is updip from anchois 1 will have at least 150 meters plus the low risk O sands of 47 meters, so getting to 200 mmcf per day production will be relatively straight forward."

I have the following questions:

1- where was this forecast 200 mmcfd production indicated by the company? I couldn´t find it anywhere.

2. according to slide 14 of the presentation, "simulated individual well productivity in the base case is 100 to 200 mmcfd". With 3 producing wells, this is equivalent to a gross production number of 300 to 600 mmcfd. But, in spite of that, when explaining the numbers in slide 8, Duncan said something like "our base case is a production level of 105 mmcfd. In onder to increase that number, we need to develop aditional resources", citing the prospects on that slide (Anchois West, Plie, etc).

Could you please provide some colour on this somewhat contradictory bit of info?

3 I understand that the gross carry by Energean of US$ 850 million until first gas is based on a production level of just 105 mmcfd. If we increase that production goal, we will have to look for aditional funding for the required infraestructure. Is that correct?

Thanks as usual for your contributions Jimmy

Another non-sense way of dilapidating shareholder´s money.

More dilution coming, to fund more ventures??

SocGen is planning to halt funding oil and gas projects.

https://www.bloomberg.com/news/articles/2023-09-18/socgen-plans-to-halt-loans-to-new-oil-and-gas-in-strategy-update

"Secondly, at 12.3% you're almost talking credit card rates, so we'll have to agree to disagree on your interpretation."

I think the debt from Energean will be a "high yield loan", that carries a 12.3% interest rate at current market conditions.

And I still think the 7% royalty will be calculated based on the difference between realized gas prices and based prices. It´s a way for letting CHAR participate in the eventual surplus to be earned by Energean as a consequence of extraordinarily high natural gas prices.

The words "in excess of a base hurdle on the realised gas price" instead of "above a base hurdle on the realised gas price" supports that point of view, in my oppinion.

As always, time will tell who is right

Regards

Hi BCD.

I don´t think I agree with some of your cals

"The interest rate on Chariots share of the carry is not 7%, it's 7% above SOFR which has varied between 3-5% over the last 24 months since inflation hit. It's currently at a peak rate of 5.3% (because interest rates are at a peak). Interest rate cuts are anticiapted to begin in 2024, but if they don't and instead continue to remain at around 5.3%, then 7% above this rate would be 5.67%."

I understand that the interest rate to be paid by CHAR to Energean for the carry amount will be:

SORF + 7%= 5,3% + 7% = 12,3 %

"This rate could well be nullified or even succeeded by a 7% royalty payment on Energean's gas production revenues in excess of a base hurdle on the realised gas price."

For the reasons explained below, it`s impossible to know if the royalty will nullify of even succeded the interest payments to Energean. I think it will be difficult for this to happen.

"Important to note: this 7% royalty is set on all of Energeans gas sales revenues which would represent a 55% (not 80%) stake in the asset (if they were to take up the additional 10% post drill). A 7% royalty payment on Energeans 55% stake would equate to a (2.75x, not 4x) compounded revenue uplift for Chariot, which could add up to and extra +19.25% in income from Anchois."

As Jimmy23 explained, the 7% royalty is going to be applied on the difference between the realised gas price and the hurdle defined in the farm out agreement.

If, for example, the realised gas price (net of transportation costs) is US$ 9/mcf, and the hurdle is US$ 8/mcf, then the calculation of the royalty will be as follows:

(US$ 9/mcf - US$ 8/mcf) X 7% X Energean production

Of course, no royalty will be earned by CHAR if realised prices are below the minimum hurdle set up in the farm out agreement

I don´t expect these royalty payments to materially change the fundamentals of the project, or to somewhat compensate the interest to be paid by CHAR to Energean. Personally, I´m not going to take that eventual royalty into account in any calc of the economics of the project.

Regards

Maybe the project is "derisked" for you, but not for Energean. Hence they are paying only US$ 10 million to buy a 45% stake in the project

Regards

This is what I posted here on Sept 10,. 2023, about the need to drill an additional well before getting to FID:

_________________________

I remember the case of Barryroe oil project offshore Ireland.

Back in 2012, Providence Resources, the operator of the project, announced a very sucessfull appraisal well (including a very interesting well flowing result), and immediately started a farm in project to develop the field.

10 years past, and spite of the operator´s regular announcements of "plenty of interest" in the data room, nobody farmed into the project.

It seems the field had some geological risks/uncertainties that couldn´t be adequately addressed by the first well. In that case, the principal risk was the eventual compartmentalization of the reservoir, and the resultant increase in the development cost.

A few months ago, the Ireland government refused to give the operator another extension to its exploration license, and the project is dead.

Maybe something similar is happening now with Anchois, and hence the need to drill an additional well.

If that is the case, it´s likely CHAR will be obligated to drill Anchois East with its own resources (i.e., more shareholder dilution) before continuing with the farm in process. In these circumstances, I would have liked the company to use the recent fundraising to drill that offshore well, instead of acquiring the onshore exploration license.

Time will tell.

Regards

Fernan

Whimax:

I asked here a few months ago about the requirement for a flow test before advancing the project. I was told that was not necessary.

Besides that, I read here various calcs about the potential outcome of a "development farm out", in relation to what CHAR will receive.

It is now evident that we were all in dreamland. The project is not derisked enough to make sure that an eventual development will be successfull

This is not the "development farm out" that we were all misleading to wait. This is a kind of an "exploration/appraisal" farm out, with an option in case of a future development.

Regards

As I said before:

- the "carry" is a loan from Energen to CHAR, at a market interest rate (7% over a reference rate). It doesn´t affect the valuation of the project

- the 7% royalty to be paid by Energean to CHAR is condicional on FID. It doesn´t have anything to do with the current value of the project.

For now, the only reality is: Energean will pay US$ 25 million for a 45% stake in Anchois. If the flow test in uncessfull, we will only receive the initial US$ 10 million, and that´s all.

Regards

If the upcoming drill and flow test are successfull, then Energean "will have the right to acquire a further 10% of Chariot's equity in the Lixus licence for:

o US$850 million gross development carry to first gas (including the US$85m gross carry)

o US$50 million 5-year zero coupon convertible loan note with a strike price of £20 adjusted down for dividends or issuance of three million Energean shares, at Chariot's option on FID

o 7% royalty payment on Energean's gas production revenues in excess of a base hurdle on the realised gas price (post transportation costs)

___________________

My comments:

As I said before, the "carry" is a loan from Energean to CHAR, with a market interest rate, and then can´t be taken into account in any attempt to calculate the market value of Anchois.

But the other elements of the "price" to be paid by Energean to eventually acquire another 10% of the project (a US$ 50 million loan note or 3 million shares from Energean, and a 7% royalty) are relevant in order to make an estimate of the market value of Anchois, after an eventually successfull flow test.

Just the US$ 50 million note puts the "after flow test value of Anchois" north of US$ 500 million.

It clears that, Energean currently perceives that the lack of a flow test so far poses a substantial risk, that should be reflected in the current market value of the project. In its current state, the project is not derisked enough to be valued at more than a few million. That`s the reason they agree to pay only US$ 25 million to acquire 45% of the project. After a successfull flow test, the the project value will increase more than 10 times

Regards

That is the real market value of the project.

As I explained in my previous post, the "carry" by Energean is simply a "loan" from Energean to Chariot, to be repayable from CHAR´s share of sales revenues from the project.

Posters like BDC, talking that "in a success case, we will have a 20% equity in a 1 tcf project, almost free of costs, with a 10 year holiday" forget that we will have to repay the carry to Energean.

Regards

Surfit:

you asked for clarification about the following paragrah in the press release:

"Energean's carry of Chariot's costs is non-recourse, and has a coupon of 7% over the one year Secured Overnight Financing Rate (SOFR), with the carry including interest repayable from 50% of Chariot's future net sales revenues from the Lixus licence"

It means the following:

- The amount of the carry will simply be a "loan" from Energean to CHAR, with a market interest rate.

- CHAR will repay the amount of the carry only from their share of the revenues from Lixus, without exposing CHAR´balance sheet (that is, if sales revenues are not enough to repay the debt, CHAR will not be obligated to compensate the déficit).

Nothing to write home about