Valuation11 Jul 2023 12:05
The rns states that the npv 10 of the anchois project for chariots 75% is $1.6 billion using a $12 mcf gas price, this appears to have been validated by netherland Sewell.
So what can we infer from this, firstly a farm out concept and later a prospective ebitda valuation.
1. $1.6 billion is £1,260 million for chariots 75% , assuming big oil will not pay npv 10 value for a pre development then let’s arbitrarily reduce that by 50% to £630 million for 75% . Assuming they farm out 50% of 75% they reduce to 37.5% and get paid £314 in terms of past costs and carried costs , then the farm out valuation for chariots shares is £314 value received and £314 for the remaing 37.5% of the licence they hold, assuming 1.1 billion shares in issue that’s 58 p a share, not far off the brokers estimates.
2. As chariot are pre revenue and pre anchois development, farm out valuations are probably relevant, but they will also be two years from first production, so they will transition over time to an ebitda valuation basis. We know the field will produce initially at 105 mmcf per day and the rns is stating $12 an mcf for valuation purposes, so the ebitda is as follows, 105x $12x 365x 96.5% net after royalties is $1215900 less opex $40 million $1175900 x 37.5% chariot interest =$440 = £346 million p.a. Shell are valued at ebitda of 5 =£1732 million or £1.57 per share, double that if you wish because first ten years are tax free and similar to tallow ebitda value of 10x.
That’s the value journey we are on.
In my opinion, there is a considerable haste in raising funds in this way and I was trying to figure out what could be going on.my speculative thoughts.
A) the first thought was something has gone wrong with anchois and they need money to keep the lights on. However, the rns is very specific nearly all the funds to be used for an onshore drilling campaign. Directors would be in trouble if they raised funds on false pretences, so this looks like a genuine opportunity.
B) in negotiating a farm out chariot need the financial backing to stop a farm investor winding down clock to get better terms as chariot run out of money, so doing this fundraising improves a negotiationg position.
C) chariot have moved quickly to secure the onshore acreage adjacent to its southern rissana acreage where 7 tcf of gas prospects have been identified in the near offshore area. They firstly need to secure that for themselves ahead of one the 40 companies that visited the data room. However, I believe there is a bigger prize which is indirectly referenced to the 3D data set offshore. I read a paper a few years ago about a deep canyon offshore , which I suspect may be a continuation of a narrow basin onshore , perhaps with a very thick turbidite sand sequence in an area with proven gas source rocks, this may be bigger than one thinks, just speculation on my part, no inside information.
Jimmy
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