Member Info for Fernan10

Another thing:
You wrote: "Azinem was bought for 24m$, todays transaction give eco's 20% a 36m$ valuation!"
You can not take a price that you agreed to pay, as a benchmark for something that you already own. This is not "third party validation", its yourself agreeing to pay that price.
By the same way, if you agreed to pay US$ 200 mm for an additional 6.5% of the block, you would say that our previous 20% was valued at....US$ 615 mm????

Maby you need to read my posts again before answering them.
I was not talking about the fundraise, I was talking about acquisition of an additional 6.5% interest in block 3B/4B.

Some posters here think that the deal is a "steal", because we are valuing the highly promising 3B/4B block at just US$ 153 mm (US$ 10 mm / 6.5%).
But, by doing that, they are just looking at one side of the transaction.
In order to acquire that 6.5% interest, we current shareholders are giving away (through dilution) c. 9% of all our assets for just US$ 10 mm, including the upcoming fully funded Gazania drilling, with a relatively high chance of success, and c. 200 mm barrels of prospective resources net to us.
I insist that this is not in the best interest of current shareholders.
Regards

As I said before, the "acquisition price" for current shareholders was the losing of c. 9% of all our assets (including our original 20% interest of block 3B/4B), in exchange for just 6.25% interest of block 3B/4B.
I don´t think that was in the best interest for us.
I´m going to write management about that (of course, I don´t expect a repply).

Regards

Gazania is our nearest project to drill...and with the better chance of success...and we current shareholders have lost c. 9% of Gazania too, in order to acquire just 6.5% of block 3B/4B.

Regards

We closed Friday trading session with a market cap of CAD CAD 137.75 mm, equivalent to US 107 mm.
We are going to pay US$ 10 mm to acquire just a 6.5% interest in block 3B/4B, by issuing shares, and by paying some cash that we subsequently needed to raise.
We as shareholders have lost c. 9% of everything else we have (Orinduik, Gazania, original 20% interest in block 3B/4B, etc), just to acquire a 6.5% interest in block 3B/4B.
I don´t think that the 6.5% additional interest in block 3B/4B has a greater value than c.9% of anything else we have (including the original 20% interest in block 3B/4B).
Somebody is going to tell me that if we make a big discovery in block 3B7/4B, this will prove to be a great move. But we have similar (or even better) chances of making a discovery in each of the blocks I mencioned (especially Gazania).
This deal is not in the best interest of shareholders, in my oppinion.

Regards

I used the wrong words. My error.
It´s not that, after an eventual farm out, Phase 22 of Tendrada will have a "marginal economic value". What I tried to say is that, after development, the impact of phase 2 on the share price will not be as high as some posters here are dreaming of.
As I said before, I expect SOU to have c. 2.5 b shares outstanding when phase 2 enters the production stage, The fully diluted share count will further increase due to stock options, stock awards to management, exercise of warrants, and fundraisings to provide for G&A expenses and repayment of the outstanding loan.
SP Angel informed a phase 2 NPV of US$ 188 mm.
If SOU is required to reduce their equity interest by half (in order to fund the equity component of the funding package) the NPV of the project (net to SOU) will be US$ 94 mm.
Whatever the instrument used to fund SOU´s equity interest, it will lower the NPV to be assigned to SOU.

Target price for Phase 2: US$ 94 mm / 2.5 b shares: US$ 0,0376= 3p

Regards

Hi Ducati.
Thanks for your educated response.
I don´t think the 4 bagger you mencioned will ever happen. As I said in a previous post, SOU will have to make a US$ 60 mm equity contribution to develop phase 2 of Tendrara. And it doesn´t have that money. Then, whoever provide the funding will take a substantial equity interest out of SOU.
The real upside is in the exploration side of the business.
If SOU can fund further exploration out of phase 2 operating cash flow, we can have something interesting here.
Let´s see what happens with the current farm out process for the 3 appraisal/exploration wells.

Regards

I´m not a doomsayer, I still think there could be a chance of significant upside from exploration.
But, being realistic, and after taking into account that SOU has no money to develop phase 2 of Tendrada, I don´t expect substantial upside from this project.

Regards

From today´s news release:
Total project value: US$ 330 mm
Debt funding: US$ 250 mm
Equity funding: US$ 80 mm
SOU´s required equity contribution (75%): US$ 60 mm

Whoever funds the US$ 60 mm (equipment vendors, farm im partner, etc) will substantially reduce SOU´s equity interest in the project.

Regards

I doub it.
SOU has no money to pay for their equity interest in the project.
They will have to substantially reduce that interest.
The "REAL UPSIDE" here will have to come from exploration.
If, a few years down the road, SOU reinvest the annual operating cash flow coming from Phase 2 in exploring new prospects, and discover 1-2 tcf of gas, THAT will have a profound effect in the share price.
I think news about the potential farm out of the 3 wells exploration package that SOU is currently offering will be very telling about the real value of the exploration assets.

Regards

According to SP Angel, all the items you listed below have a NPV of c. US$ 200 mm (see page 2 of last report). Divided by, say, 2.5 b shares (yes, SOU will keep issuing shares), the target price for all this stuff is US$ 0.08/sh, or 6.4 p/sh.
And this target price assumes no significant dilution in SOU´s equity interest in the Tendrara production concession (a big if).

Keep dreaming.

Regards
___________________________
Phase 1 Micro LNG Development - Sound fully funded for share of development costs
Deployment of field gas treatment, processing, liquefaction and storage facilities to deliver mobile LNG to buyer at site. The LNG buyer will distribute and sell on to its growing Moroccan industrial consumers within the domestic gas market.

Supplies of LNG are to be an annual contractual quantity of 100 million standard cubic metres of gas (approximately 4 billion standard cubic feet of gas per year) over a ten-year period in a liquid form.

Binding gas sales agreement and associated funding in place with Afriquia Gaz*. A ten-year commitment from first gas to sell annual contractual quantity of 100 million standard cubic metres per annum with take or pay agreement priced at $6–$8.346 per mmBTU ex plant.

Development utilises the existing well stock of TE-6 and TE-7, with additionally the drilling of one new well as required to maintain the ten-year period of production plateau.

Gas as a transition fuel flowing to the GME pipeline

Phase 2 Tendrara TE-5 Development
20’’ inch, 120km Tendrara Gas Export Pipeline ("TGEP"):

Tie-in to existing GME pipeline (Station M04): FEED completed by Metragaz (EMPL operator)
Pipeline EIA permit approved
70 mmscf/d raw gas CPF processing capacity: FEED completed by Enagás Consortium
CPF EIA permit approved
Gas Sales Agreement ("GSA") with ONEE (Office National de l'Electricite et de l'Eau potable) signed November 2021 for domestic power plants for gas-to-power generation (transit via GME line), minimum volume of 0.3 bcm/year
Six horizontal wells planned for First Gas (Phase 2)

With the oil and gas Majors now Cash rich, anyone for 25% of a future development supplying Morocco and potential Europe. Dreams............

ok Jimmy.
Thanks very much.

Regards

Fernan

Hi Jimmy.
According to today´s news release, the onshore CPF will have a 70 mmcfd processing capacity.
Is that going to somewhat limit future expansion of the facilities?
wouldn´t it be better to plan, for example, a 200 mmcfd facilities from the beginning?

Regards

Fernan

We currently has an indirect 1.28% equity interest in the Canje Block (7.35% X 17.5%).
If we want to increase our exposure to c. 2%, we need to pay US$ 18 mm to exercise the warrants we have.
Regards

Fernan

thanks Phoebus.
I didn´t deduct current liabilities at the end of 2021, because ECO also had current assets (other than cash) for an equivalent amount at the same date.
But I agree with you that we can forecast another US$ 2 mm to be spent in G&A expenses for Q3-Q4.
Regards

Fernan

Accorging to the CPR (page 98), the chance of success of each reservoir target in the Gazania well is:

1. Namaqualand target
Gross best estimate resource: 191 mm bls
Trap: 80%
Seal: 65%
Reservoir: 75%
Source: 95%
Overall Chance of Sucess: 37.1%

Gazania target
Gross best estimate resource: 208 mm bls
Trap: 75%
Seal: 65%
Reservoir: 75%
Source: 95%
Overall Chance of Sucess: 34.7%

You can find a lot of technical info on the well here:
https://www.africaenergycorp.com/site/assets/files/3246/2021-04-block2b-presentation.pdf

Regards

Fernan

I adjusted the numbers in the forecast cash balance at the end of the month, to provide for the costs associated with the Azinam and JHI transactions, and the issue of the CPR.

Here is the new forecast:

*Cash balance at Dec 31, 2021: US$ 5.2 mm
*Jan 10. Azinam assets acquisition
Cashless acquisition.
No cash balance included in Azinam assets
*Jan 12. Exercise of options:
Cashless exercise.
*Jan 19. Further share purchase in JHI.
Cashless purchase of shares
*Feb 24. Sale of Solear´s renewable energy asset: US$ 2 mm
*April 6. Fundraise: US$ 25.5 mm (before expenses)
* April 6. Fundraise expenses: 6% (estimated): - US$ 1.5 mm
*Q1-Q2 G&A expenses: US$ 1mm/quarter (estimated): -US$ 2 mm
Advisory and legal costs associated with Azinam assets acquisition (estimated): -US$ 0.5 mm
Advisory and legal costs associated with JHI transaction (estimated): -US$ 0.5 mm
CPR cost: -US$ 0.2 mm (estimated)
Forecast cash balance at the end of June: US$ 28 mm

Drilling cost of the Gazania well
From January´s Align Research report: “ The Gazania-1 exploration well is expected to be drilled in H2 2022 at a cost of US$25 million. As Azinam farmed into this block, Eco will have to finance some 72% of this well for a net cost of US$18 million for its net 50% Working Interest.”
On April 19, our partner Africa Energy informed that ECO had deposited US$ 20 mm in a escrow account, to support our capital expenditure requirements for the Gazania-1 well on Block 2B. I´m sure this number includes some reserve for contingencies.

Conclusion:
If the Gazania well is going to cost us US$ 18-20 mm, after drilling it we will still have enough cash to fund G&A expenses and a well in Orinduik.

Regards

Fernan

On April 19, our partner Africa Energy informed that ECO deposited US$ 20 mm in a escrow account, to support our capital expenditure requirements for the Gazania-1 well on Block 2B.

Regards

Fernan

I forecast cash balance at the end of the month as follows:
*Cash balance at Dec 31, 2021: US$ 5.2 mm
*Jan 10. Azinam assets acquisition
Cashless acquisition.
No cash balance included in Azinam assets
*Jan 12. Exercise of options:
Cashless exercise.
*Jan 19. Further share purchase in JHI.
Cashless purchase of shares.
*Feb 24. Sale of Solear´s renewable energy asset: US$ 2 mm
*April 6. Fundraise: US$ 25.5 mm (before expenses)
* April 6. Fundraise expenses: 6% (estimated): - US$ 1.5 mm
*Q1-Q2 G&A expenses: US$ 1mm/quarter (estimated): -US$ 2 mm
Forecast cash balance at the end of June: US$ 29.2 mm
Drilling cost of the Gazania well
From January´s Align Research report: “ The Gazania-1 exploration well is expected to be drilled in H2 2022 at a cost of US$25 million. As Azinam farmed into this block, Eco will have to finance some 72% of this well for a net cost of US$18 million for its net 50% Working Interest.”

Conclusion:
If the Gazania well is going to cost us US$ 18 mm, after drilling it we will still have enough cash to fund G&A expenses and a well in Orinduik.