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Wow - that was out of the blue.
Absolutely fantastic bit of business.
As I see it:
1) Short term cash flow concerns well and truly sorted
2)Japex clearly see value in management and exploration success to date
3) The £100 million finance facility puts future production deals within reach
4) The dilution (49%) is minimal. Long boat get £16m now (3x current cash in bank) in return for 50% of the company
5) The RNS hints at small production deal which is expected to follow shortly ("US$4 million, payable on successful completion of a production acquisition currently under review"). I wonder if they wanted to get the JAPEX deal announced first?
6) Lots now rides on Velocette drill. Not just the drill result itself but a further £30 million investment to follow.
7) The management still have opportunity to monetise Kveikje. But no immediate time pressure to do so. Can maybe even wait for adjacent Oswig result if that adds more value.
8) Future exploration in Norway and Malaysia to follow ?
Based on simple *** packet maths I reckon this should be ~22p / share (minimum). Though that is based on cash in bank alone and ignores much of the possible upside above. My one minor concern is how much is currently riding on Velocette drill now. Now just the drill result but an additional £30 million investment (though what an opportunity - if it comes in then share price could easily be 60p+ by Q3). In terms of cash in bank and exploration results / future prospects LBE now in the strongest position it has every been : but with a share price yet to catch up.
Very pleased! Credit where it is due, well done LBE.
The dream is very much alive again.
^ they just need to get a monetisation deal done and over the line:
a) prove the business model.
b) generate regular income to justify the wages.
if they can do that then a return 40-50p entirely possible in short order.
Fwiw: Kistos just bought Norwegian producer (Mime petroleum) for $1 (plus debt and issues of bonds). Frustrating LBE missed out on such deal again. However with Dutch and UK windfall tax we are in the correct sector.
My feeling is LBE saw more value (long term) in holding onto Kveikje until adjacent Lotus is drilled. However financial necessity requires monetisation now.
If a deal can be concluded for Kveikje then all short term financing concerns are very quickly sorted.
Looking forward LBE has existing exploration finance facility available until end of 2024 (or longer) which could potentially be utilised for future drills. There is still a lot of uncertainty, and the company needs to prove it can monetise its success. However, I still believe this is massively over sold at 10p.
There is not much else in results we didn't already know:
1) The management now have time pressure to monetise what exploration success they have had to date.
If they can then share price should be >>10p
2) A future raise is possible. Though it would be madness to do it at 10p.
^ agree .... Though cash burn (~100k per month) not ridiculous assuming modest exploration success can finally be monetised.
If / when they can add production (as promised by end Q2) then a rerate is indeed due. Current share price doesn't cover cash in bank let alone modest exploration success to date.
Ultimately it's all relative to a market cap of £6 million...
^ it's all hypothetical just now : However even at $10-20 profit per barrel the numbers would become spectacular if they could add just a small amount of production to the mix (1-2k bopd)
Worth repeating some simple math...
Lets imagine LBE can add just 1000 barrels / day production.
That is conservative (and very achievable with existing cash in bank or straightforward kveikje swap).
That could generate £1.25 million per month (assume $40 per barrel profit).
Or £14.88 million profit per year.
That is very quickly a lot of money for a company with current market cap of just £6 million.
The slightest bit of good news could see share price quickly return back to 30-40p, or higher.
You would think that if management can monetise the moderate success so far this should rocket from this low point.
Poor update but share price held up well
^ I don't think they wanted to trade Kveikje.
Rather they waited to see how the other drills went.
As you suggest it has (greater) future value along with Lotus.
However : with few other options on the table it is time to "sh-t or get off the pot".
No matter how they monetise Kveikje's 3 million barrels (say £15 million or 1-2K bopd) it will move share price well north of current levels (£5 million market cap). They have done it in the past with Faroe so hopefully a deal can be done here.
Some simple maths...
Lets say LBE can swap Kveikje (3 million barrels in ground) for production at just 1000 barrels/day.
That seems achievable and conservative given the results.
Assume £40 profit per barrel.
That would generate ~£1.2 million per month.
Or £12 million / year.
Suddenly the current market cap of £5 million looks very cheap.
^ Kveikje alone won't get share price back to £1. However with patience (and luck) it's not impossible longer term. I certainly don't think company going bankrupt (current valuation way less than assess plus cash in bank).
The loan facility is potentially massive if used wisely
> Quick question, is everyone still thinking the management team is the real deal
I don't doubt their geological skills or integrity.
Commercial skills lacking so far.
Any kind of monetisation of Kveikje should see share price jump from this low level.
Right - I am back in...
Might yet regret this!
Some simple maths : Kveikje discovery (3.5 million barrels) should be worth ~17.5million ($5 / barrel).
Current market cap is just £5 million.... There is a clear disconnect.
Assuming they can monetise Kveikje by end of the month, as promised, then share price should surely move upward.
Sad to see what has become of share price here... Sold out at 40p (for chunky loss). Still think the management team is legitimate and will might come good eventually. Could be good investment at these prices.
3 issues:
1) need to prove they know how to monetise discoveries to date.
2) they are completely at the behest of equinor.
3) very small fish in big pond
> Clearly the market is saying nobody will get the 12.5p
At share price of 6.5p the deferred units are valued by market at 0.5p rather than 6.5p suggested possible.