Member Info for Jimmy23

https://marocgazette.com/story-z4130022
Jimmy

Chariots market for gas in Morocco will initially be for power generation and will be competing against Lng pricing from Spain.
https://www.moroccoworldnews.com/2022/09/351366/minister-morocco-is-negotiating-medium-term-lng-contracts
The current price of lng in Spain can be found at

https://www.mibgas.es/en/market-results/daily-price/gnl-tvb?date=2022-10-07
Converting to mcf at 3.41 kwh per mcf works out at approximately $23 mcf in Spain,
Chariot prepared it’s economics at an average price of approximately $10 mcf.

Jimmy

Chariot has some residual interest in Namibia where the majors are now investing again.
Jimmy
https://12ft.io/proxy?q=https://www.upstreamonline.com/opinion/majors-head-to-namibia-apart-from-one/2-1-1328232

The dramatic reduction in gas exports from Russia is well described here.
https://www.upstreamonline.com/production/gazprom-starts-feeling-the-heat-as-europe-prepares-for-winter/2-1-1326827

Much of the gas was put into storage so there is a problem on how to fill the storage system next summer, so likely to keep gas prices high for some time,
Jimmy

Hi surfit.,
I believe the immediate requirement for Morocco is to secure lower priced gas for its power station asap, because it’s importing gas from Spain, then to convert the coal powered stations to gas, which is more energy efficient and greener.
The production of green or blue hydrogen only makes sense for use in industries that need hydrogen such as oil refining and green steel and cement.
Jimmy

Hi surfit,
I truly struggle to understand why the share price is this low and the only explanation I have is the 50% equity dilution.
With regard to AP being the reason, I don’t think so , after all he put his money where his mouth was and that’s usually a good sign.
With regard to reputation, they secured Soc Gen as lead banker and schlumberger to perform the FEED , and they are big names and that’s important.
My thinking is that the offtake contracts will be the catalysts for a major re rate.

Jimmy

Not really, chariot need to farm out the rissana licence, so presentation at oil conference is the right thing to do.
Jimmy

Interesting to note this ipo at €411 million market capitalisation and loss making .
See.
https://home.cib.natixis.com/api-website-feature/files/download/12338/lhyfe_press_release.pdf

The chariot green hydrogen project is valued at nil, even though it’s partnered with total Erin.
Jimmy

Much of the gas in storage in Europe actually came from Russia, so if it’s used during the winter the question arises as to where will the gas come from for storage filling next summer,
At present the major replacement of supply is coming from LNG which is currently priced at around $27 mcf in Spain.
Europe will not want to be dependant on Russian gas again, so that means dependency on lng imports instead, which in turn means higher gas prices than recent history.
Good for anchois.
Jimmt

OPEC to cut production

Great article wizard.
The key message I got from that article is that a gas price cap would be linked to the international traded price of Lng.
LNG is priced off the price of crude oil and with one about to cut production that’s likely to stay high .
The current price of lng in Spain works out at about $27 mcf,
Chariot have prepared their economics at $10 mcf and based on a previous reserve estimate of 361 bcf had an npv valuation of $900m for chariots 75%
The new audited reserves are now 637 bcf.
Jimmy

Brochure states.
AIF presentation: Chariot Energy

Chariot aims to be a provider of cleaner energy across the African continent via the Company’s Transitional Gas, Transitional Power and Green Hydrogen business streams.

The Anchois Gas Development Project, operating under the Transitional Gas business, is a high value, low risk gas development project with strong ESG credentials in a fast-growing emerging economy with a clear route to early monetisation, delivery of free cashflow and material exploration upside. The project is located on Chariot’s Lixus Offshore licence, which covers an area of approximately 1,794km², with water depths ranging from the coastline to 850m. The area has extensive data coverage with legacy 3D seismic data covering approximately 1,425km² and 5 wells, including the 2022 Anchois-2 appraisal and discovery well.

Jimmy

Chariot and total Erin were early movers into this area.
Now Anglo American and Edf of France are doing the same.
See.
https://www.rechargenews.com/energy-transition/anglo-american-and-edf-launch-envusa-to-green-south-african-mines-with-power-and-hydrogen/2-1-1326776

A major opportunity is to provide hydrogen on site for the heavy duty mobile equipment instead of diesel, as Anglo are proposing to do.
Jimmy

Following the encouraging results of the Anchois-2 drilling, which showed the presence of an accumulation of gas, the company Chariot is in the process of integrating the results of the studies and analyzes carried out on the data from the well in order to further assess the potential area, and to conduct the development study of the Anchois discovery.

https://www.lopinion.ma/Entretien-avec-Amina-Benkhadra-Focus-sur-les-decouvertes-importantes-de-gisements-productifs-de-gaz_a31928.html

Jimmy

The eu announced to day that the max price electricity could be sold from renewable and nuclear sources is €180 per mw.
The equivalent energy for natural gas results in a price of approx $51.50 per mcf.
Chariots economics for morocco are based on an average price of $10 mcf and yet the share price is approx 1/4 of the brokers valuation targets.
Jimmy

Surfit,
Clearly the objective for long term share growth is to minimize equity share dilution which I think we all agree on , yet you are correct to ask why was a 50 % equity dilution the right thing to do .
A standard farm out deal was likely to have been offered to chariot which is a 50% of chariots equity for 100% of the well costs and then pass operatorship to the investing party.
So for 50% equity dilution chariot has increased proven gas volumes from 361 bcf, to 637 bcf and perhaps as important have substantially derisked 754 bcf of low risk adjoining gas prospects.
A farm out now would bring cash lump sum and get the 754 bcf drilled, net result will be a very much higher proven gas volumes per share .
While the audited risk assigned to the 754 bcf prospect at between 49 and 63% , I think it will be higher , but that’s a personal view.
Clearly the proof of this strategy is announcing a farm out for 25% with large lump sum payment and a three well drilling programme.
So far so good, I am patiently waiting for the deal in the next few weeks.
Jimmy

Surfit,
Good that you have raised those points and they are worthy of discussion.
1. Yes the directors did not farm out the anchois 2 exploration well and instead equity financed it including their own money. At that time the farm out market was poor and the exploration risk was low so for a project with proven gas this was wort it, we have gone from a share price of 7p to three brokers valuations of circa 55p. Unfortunately a lot a the equity investment was short term and moved on and chariot need to secure long term institutional investors.
2. In my opinion I believe the 2021 equity financing would not have succeeded without AP involvement. I did not like the long underwriting period, but it worked and we now have a valuable asset. The fact that Ap persuaded two companies he was involved with to invest I think is a positive rather than a negative.
3. With regard to tharisa I do not think there is anything unusual in that deal, if anything he is bringing a great opportunity to chariot and total Erin. The fact that total Erin are 51% jv partners on that deal indicate to me it’s likely to be an arms length deal. I have no worries on that front.

The next third party validation will be a farm out and I am expecting a great deal relative to the current share price.
I am open to discuss all issues that could be holding back the share price, including AP, but I just don’t think that’s the issue.
The farm out and gas sales contracts are what will cause a major re rate.
Jimmy

Thank you for your comments Kingbilly.
I think it’s really important that there are different views , ideally backed up with facts, as we are all trying to understand why the market for chariot is nowhere near three different brokers value estimates, which in turn had been risk adjusted by 50%.
Jimmy

Kingbilly,
I acknowledge that I nearly always post positive about chariot and that because I think they are doing the right thing and that they have audited proven gas volumes . I spent most of my career doing oil and gas and mining debt financings so I can see the risks and also see the steps that are required to mitigate those . Of course there is risk with a pre revenue company, but the fundamentals are very strong with the anchois project, but the market is applying an exploration risk premium to proven assets. So important to be patient with this share.
With regard to me only posting positive about chariot, here are my list of negatives.
1. Chariot should get a quote and market itself in Canada where natural resource assets are valued more properly.
2. The underwriting offer period for financing for the June 2021 financing was way too long and effectively stopped a rise in the share price, in my view, others may disagree.
3. Chariot have not explained to shareholders how it’s going to recognise revenue and profits from its renewable business.
4. Shareholders have no idea of the project nour potential, intuitively it feels like the right thing to do, but shareholders need to get an idea of what a realistic potential is here.
5. I disagreed with previous management exploration financing strategy, based on farm outs which did work, because the farm out market was terrible.
6. Chariot should purchase an interest in gas production to get immediate cashflow, reduce equity dilution risk.
7. Communication with shareholders needs to be more frequent, particularly as there are three pillars in the business there should be a good news flow.

Jimmy

Hi Kingbilly
Good points and I have given my views, others should give their views to see if we are missing something that could explain these awfull share prices.
With regard to equity dilution risk, a farm out is already heavily priced into the share price and as I previously posted development capex will achieve payback in circa 18 months so both debt and farm out finance are likely to be available .
Just need to announce a deal like cairn did and the market will reprice
Jimmy