Member Info for haggis_trap

^ Correct, tax on Norwegian oil & gas is high.

Though with windfall taxes the equivalent rate in UK and NL is now also 80%.

The difference with those sectors is

1) Stable tax regime in Norway.

2) Very generous breaks on exploration.

LBE is a unique position to exploit all of this....

It is not easy to become an oil & gas explorer in Norway.

Plus Norwegian oil & gas is now very important to rest of the Europe over next 3-5 years.

Hence the reason Japex have bought in.

At 20p/share the market cap is currently less than £11 million.

Undeniably cheap given:

- Cash in bank is £12 million

- Existing discovery Kveijke (4 million barrel net to LBE) surely worth ~£16 million ?

- JAPEX to put £16 million in when deal concludes

- JAPEX to put further £4 million on conclusion of production deal (that we know is under negotiation)

- JAPEX deal brings $100 million finance facility for future production deals

- Velocette well (Q3) could bring 26MMBOE to LBE (20% stake). Eye watering value if successful ($4 per barrel?)

- Velocette well could also bring additional $30 million from JAPEX

This is seriously cheap.

Anyone talking about lower entry point is not seeing the big picture and risks missing the boat....

There are a whole number of triggers which should boost share price in coming months.

The cash burn is not unreasonable (£100K/month) assuming the management can deliver on promises.

My only concern is that a lot is riding on Velocette. Though at these prices I would argue anticipation of success not yet priced in? So arguably at 20p the Velocette well remains something of a free hit (if it delivers then I dare not imagine where the share price might go).

One thing not mentioned. Given current geopolitical situation then Norwegian oil & gas is a great sector to be invested. Norway is the biggest provider of oil & gas for Europe and politically stable. On top of that the tax breaks for exploration are generous, plus unlike UK and NL there are no issues with windfall taxes.

JAPEX have obviously done their homework and see value in the management team and work to date (it is not easy to set up an exploration company in Norway - hence the reason JAPEX bought in). Good luck all.

@GeordieShores,
Exploration takes time and is risky but offer potential for good returns.
Current geopolitical trends make Norwegian oil an attractive sector to be invested.
This is now a fully funded company with longer term potential to offer significant returns.
However : you would you would want to remain invested for 3-5 years rater than just the next drill.

> size & scale of the partner

Indeed.. Simply adding JAPEX to the company name surely add significant market credibility.
They now have a vested interest to make sure this flys (which it surely will now).

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