RE: New acerage and MOU RNS4 Nov 2019 14:08
Apparently, the Red Cave acreage is hard to get hold of, the locals were surprised we managed to get the acreage. We need the acreage to do the intended JV, given that we intend to sell Austin and ZR.
The Red Cave is well understood locally, as are the economics. Banks are willing to enter in RBL on the Red Cave. Once we have the first four done, we will be able to get RBL to fund the next four.
If we get the JV completed, our equity into the deal will be our losses, which are worth about $5mil. We have discussed multiple times on here how the losses could be used to incentivise US private investors to invest into our PUDs. In this case PA has conjured a much better solution which gives much more upside with less risk.
Assuming the JV goes ahead and everything works out as intended, then by end of April we should be cashflow positive off our own Red Cave acreage, have an NRI in our JV partners acreage, have operator fees, plus the fees for reporting and compliance.
NB there is no guarantee that this JV will happen. In my opinion, a JV will happen if not with this potential partner then another. There is 90,000 acres in the Red Cave and this potential partner only has 25,000 acres, so there is plenty to go at.
If the JV is done then our NAV goes up massively and makes us an attractive company. Everyone should note that entering into JV doesn't stop us doing further deals with other parties.
As a sideline, an interesting play is to pick up older assets work them over, sell them on and look to keep the IDCs. There is no reason why we can't continue to accumulate IDCs to use in this JVs or other ones.
DYOR
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