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I also suspect it was required to announce around now. Cash is needed for work and upfront JV/RBL costs being done this month. Negotiations would have been going on last month and things had to be tied up by 31 Dec. It likely had to be reported today.
Panama, I think the $4mil is needed to make sure we can pay for recompletions and the two existing drills without risking breaching liquidity covenants (as was done in 2021/22). All of that was (realistically) always going to happen before a JV was signed. As a few posters have pointed out, the cash position was tight to do all this work. I suspect with the low November production figures it became essential.
However, the strength of the company is shown by the fact that the tap was on better terms than previously agreed - there must have been other options for COPL to borrow otherwise the revised conversion price would have been as previously agreed.
I think this is a good sign for the JV - Art making sure COPL can increase production and value on its own without the JV, putting the company in a better bargaining position.
Utter nonsense from Pilot - it's just an extension of the same finance deal signed months ago, but with slightly better terms negotiated reflecting the stronger position that the company is in. Yes it has hurt sentiment today, but it hasn't changed the fundamentals - which haven't changed since Christmas despite the big increase in shareprice. If the recompletions work and production increases markedly, that sentiment will change again - with a permanent uplift.
The £1+ people talk about comes if the JV comes in AND new wells come online - starting this month, but likely only completed in the 2023-24 drilling season. Sentiment might take this that high even sooner, e.g. on a good JV, success on the recompletions and success on the two drills that are going ahead this month. All to play for.
I agree Tibrun is jumping to conclusions on the success of the first recompletion - negotiations on the tap purchase and associated agreements on conversion price would have had to start before Christmas, i.e. before the first recompletion.
Equally, there is no reason to have expected an RNS on the first recompletion today - although it is possible. The weather in Wyoming was appalling before Christmas, so I would not be surprised if there were delays. You then need a bit of time to see what the response is, i.e. what kind of stable flow rate there is, if any. It may also be considered commercially sensitive prior to the JV negotiations completing.
What I would expect is an RNS on the progress of recompletions at some point this month. I hope this week, but who knows. Could be any time.
Some sort of RNS on the financials was not unexpected. All LTHs knew that the bond conversion price changed on 25 Dec, and some may have noted a post reminding us that there was previously a requirement to put in place an RBL by the end of 2022. We also knew that the recompletions were going ahead and to do that out of existing funds would be tight re: the liquidity covenants. What we didn't know is how extra funds would be found short-term until RBL/JV was agreed. What we didn't know is what would come first - an RNS on the first recompletion or an explanation of the finance plan - nor the precise terms.
I think some were expecting the JV to come first. Personally I don't think we are going to get an announcement on the JV until the end of the month or Feb (if it is agreed). The other side are only going to present their proposals this week. Work will be required after that, with no doubt further negotiations before an MoU. Today's RNS hints that we will actually hear about a term sheet on the RBL first - I suspect the board want to see the JV proposal before agreeing the RBL in principle to make sure they are not tying their hands or wasting an opportunity.
This is not a bad RNS. Long-term, it still all turns on whether production goes up (recompletions now key here) and whether we get either the JV and/or good terms on the RBL. The good news is that, worst case, we are currently a small, profitable, oil company. The downside from here is pretty small. The upside is huge.
I'm hoping for a suspension on the JV announcement as well. However, I don't read the interview as saying there will be a JV announcement first thing in the New Year. Rather, the major will provide its proposals. No doubt there will be further negotiations to follow. I would expect JV announcement, if it comes, more like end of Jan/Feb.
What will hopefully come early Jan is an announcement of the results from the recompleted well. In theory could even come between Christmas and New Year (although I suspect no one will want to put that together whilst on their hols!)
Some really helpful stuff on this thread. With one notable exception - unsupported nonsense about a placing. The balance sheet is fine and is substantially improved by the removal of the hedge for the next 6 months, which will greatly improve cashflow. As Art said in interview, take the hedge away and COPL is already profitable.
The idea of a placing soon is also nonsense because it requires agreements of bondholders and lenders, who are much more likely to say "let's do another bond". Of course a placing in the future is possible, but not unless and until the JV falls through/ is signed without a cash-component and the RBL options are rejected by COPL.
I'm hoping for a New Year RNS telling us oil is flowing from the recompleted well. If that happens, COPL will be firmly profitable, and we know further booked reserves. We should move back in the 13s (around the bond conversion price) at the very least, if not mid-teens.
All IMHO, DYOR
I think these calculations are optimistic, but I agree if the recompletion works, then the uplift in revenue is significant. Even one well should bring us to break even. However, it hasn't happened yet, so let's not count chickens...
As to the share price, I think the minimal movement is because the good news on the hedge re-structure is limited - it should help cashflow a bit, but it's cost-neutral for a reason - the market considers the overall trade-off of hedges to be neutral - and the good news is balanced by the bad new on production. In essence, we are not getting beyond 45k barrels in either Nov or December. A lot of people - me included - thought we would push up to 50k or so given the flaring and dewaxing work. 5k barrels at, say, $50/bbl marginal netback (average netback no relevant here) is $250k per month in additional losses. Not ideal.
All will come good, if the recompletions work or the JV goes ahead - and I think it will - but we are still in 'hold tight' mode until Jan. If I wasn't already in, I'd be buying more, but I suspect it won't entice investors with deep pockets until the company is either production is on the up or has a JV.
What we also need to remember is that it only require an extra few thousand barrels a month and we are cash-flow positive. If we were break-even, we'd probably have enough cash on hand for the re-completions already - or could get it bearing in mind each is done one at a time and oil will start to flow and be sold from the first wells before the process is complete.
As long as COPL can squeeze an extra couple of hundred barrels as day out of existing wells - which is the plan - the recompletions are therefore already covered. If it can't, and there's no JV/RBL, the tap feature is a back-up.
Steve, I can' see the lead bond holder extending the deadline for the conversion price dropping - why would they? Even if they back the company to the hilt, it would be giving away free money.
I'm not 100% sure we won't get an RBL or JV announced by Christmas - the complete radio silence makes me think that they are working on something and don't want to risk communicating anything they should not. However, the market has clearly assumed it won't happen given the price is now fairly static below the conversion price. I'm sanguine if so - just means a slightly bigger dilution than hoped for. Better terms on a JV/RBL could more than make up for that.
The precise percentage isn't a big issue. I suspect bondholders who haven't sold are holding on in case the RBL doesn't happen by Christmas, in which case the conversion price drops.
Also there wouldn't be a TR1 for bondholders unless and until they convert. Given that only a handful of tranches have been converted, I doubt any one bondholder held sufficient shares for a TR1, even if they held the shares when they converted. They would need to have converted and held all the shares from more than one of the bond tranches.
I think the point Stas hits on though is that timing still matters. Yes COPL has a good chance of being successful. But the upside is smaller if it doesn't get producing oil when prices are strong, and has to sign up to finance deals when interest rates are higher. Both those factors have cost COPL real money over the last year, and that makes the company weaker and in turn less valuable to those who might invest or JV. They will cost COPL real money in years to come as it takes longer to get oil coming out of the ground, so increasing finance costs, potentially reducing the amount that is profitable to take out over the long-term (bearing in mind demand is likely to reduce in the 4-decade life of this field).
To be clear, I am confident it will come good - and I have no doubt Art wants that too! No doubt desperately so. However, he's done himself no favours by overpromising in the past - saying he's "confident" something will be done by so and so date. He always caveats, but too many small investors take it as a firm date.
Otherwise, Wookie is right - don't panic! If RBL or JV sorted by Christmas then we the LTHs are golden IMHO.
Thanks 1509. Saw that table before. It's very useful, and shows how close we are to making a profit even where we are now
- The loss was $466k
- The operating netback less derivatives loss (which is fixed) was $38/bbl
- That means we needed to produce just an extra 136bbl/day to break even. In fact less than that as some operating costs are fixed.
Even being pessimistic, 136bbl/d is the kind of increase that will easily come, without further well recompletions, or even the improved gas returns, i.e. without any major expenditure at all. Which is why the risk of this company actually failing is small - it would take a failure to complete either the RBL or the JV in the next 6 months or so (if not longer) AND a significant fall in the oil price (which we are partially protected against by the hedge). Hence the market is dramatically overestimating the prospect of failure.
My view is that the market is simply not confident in the JV or an RBL in the next month, and so is trading on the basis of a high probability that the conversion price of the bonds is likely to drop, so that a load of new shares at 13p-ish will come into existence. Almost nothing priced in for long-term potential.
But will the re-completions satisfy the requirements to drill new wells? I thought not.
If it is just $4mil in the bank, that sounds tight. However, by my reckoning it should be closer to $5mil than $4mil. I would think they need to re-complete one by one anyway, so some of that extra production should come on stream before the $3.6mil is all expended as well. So should be ok, absent a big fall in the oil price.