Oil & Gas Evening / New speaker, Edison Oil Analyst Elaine Reynolds plus #TRP & Hardman CEO Book Tickets Now
MB has been pretty open about his strategic thoughts and options he is pursuing. Given that they have made a material discovery, one way or the arrow seems to be pointing up now. Where the shares (diluted or not) stand from here five years from now is a conjecture. Regardless, I appreciate MB's openness in his contemplations. The one piece of information he dropped that was of particular note to me that no one seems to have picked up on, was the bit about how the local political issue with permits to drill Heron was not really resolved, only put on hold to allow the drilling. That for me is the most material concern going into 2020. I remain very skeptical that whoever that party is is going to be less of a road block now that there is oil proven out then before there was. I have no idea how much influence the federal GOM has over local politicians, but if they have little, this would be the one thing I could see blocking the sought after exploitation permit from landing early in 2020 if at all. That group has to know the leverage they have over MATD at this point given their level of resources on hand with no other quick option to materialize cash flows. I've seen enough of how things roll in Mongolia since 2011 that nothing would really surprise me. Hope I'm wrong of course, since I hold a lot of shares of this thing.
I mostly carefully listen to what Mike says, and go from there. I don't trust the GOM at all, but beyond that wildcard, there are no guarantees and I've seen no evidence thus far that MB is not a straight shooter and doing the best he can to deliver. There were/are many people saying he would not get this or that well drilled for various reasons, and at the end of the day, he got most of them drilled, and at least one appears to have hit pay dirt. No we go from there. He will provide more information as it evolves. Note also they did a really good job keeping the lid on the good news on Heron... no leaks. That is a pretty professionally run outfit in my book.
Got a moment to listen to M Buck interview. My take on the pros and cons:
- Clearly highly highly likely that given a decent level of funding/cash, MATD is going to be able to develop Block XX into a significantly producing entity. How fast they can do that will depend a lot on how much cash they can generate, or partner(s) they can JV with.
- Clearly the national GM is "excited", and one would think, willing to help move the paperwork along. Still, it IS the GOM and they have a long history of shooting themselves in the foot in regards to these kinds of things.
- It appears the M Buck is open to options, both fast track and slow organic growth to move this forward. Far from having made a decision as developing events need to still unfold.
- Fast track options might require significant dilution (but one would assume that would be balanced out by much more rapid ascent from that lower base.)
- The local Government entities could seriously gum up the works looking to extract the biggest payoff possible before they allow the golden goose to breed, literally to the point of delaying production permit past 2020. To be honest this is my biggest concern in the next say 6-9 months... and nothing would surprise me that even if all the paperwork is "supposedly" all squared away, that one of these characters comes dancing in from the sidelines just as they start their field expansion program next year and throws a spanner in the bore hole.
Personally, I plan to keep adding shares but spread out over time from now until next spring. I think the odds are very likely that over the next 3-5 years, that will end up paying off.
This is a pivotal day for MATD, IMO. I will say right now that I will not be surprised that there will be negative surprises going forward, starting with some faction from the GOM "changing the deal". It's how they roll.
It also appears the cumulative statistical odds of success we discussed last summer proved out.
That said, I have seen enough of Mike Buck to believe he is going to make good long term business decisions for the advancement of MATD. True, they so far have only punched in to a relatively modest hole, but I do think Buck is being conservative in his announcement, whatever that is going to imply. The build-out options from here are many, and could lead to a rapid (multi-year) expansion of the MATD footprint and operational trajectory. I am in this for at least five years from here is my feeling this morning (in the USA). j
I am adding to a significant share holding going forward.
Congratulations to the long-term holders. I have only been in this for two years.
As I mentioned earlier, I'm a bit cynical regarding what is going on with this local official. There is no way he/she was not aware that the drill rig was in his province long before it commenced drilling. If there were issues with the "permit", they had plenty of time to inform MATD before they ever went to spud that they would shut it down, but they chose not to. Now we have an extended delay to sign off on paperwork which is likely done for some time, yet nothing. Not to be a conspiracy theorist, but it would not surprise me if the let it go all the way to an oil strike before they come back and insist there is still something wrong with the permit. After all, at that point they would have maximum leverage over the company to "deal." If one really wanted to fantasize, then the national GOM could be called in to mediate the discussion. Sounds kind of like Oyu Tolgoi? I have no doubt that if they hit oil at either site, the shares will pop, but not like it would if they have a clean ramp to production. The GOM really needs to get their act together, and this is not helping.
The run costs are just the symptom. None of us know for sure what is going on behind the scenes, but it seems likely the local politician waited until the drill was turning and funds committed, (and even until a potential strike could be imminent) before he/she brought up the "concern". I do not agree this debacle symbolizes incompetence on the part of the MATD management. This is simply a local entity waiting until they had maximum leverage to hold the company hostage. I am frankly a bit surprised the GOM would allow this to happen. The reputation of Mongolia to foreign investors is already in the trash can, what with the circus over at the gold/copper mine, the refusal to build a clearly needed railroad at the coal mine, and now this. The country needs oil; they need the oil for the refinery they are building, and for the revenue it will generate directly. It frankly stuns me they would allow a local entity to shut down this operation at this juncture. Moreover, at this point, even if/when the drill is allowed to proceed, and if they hit commercial oil, I am pretty much assuming it is going to be a given that the "excellent terms" that MATD trumpets for the agreement with the GOM to leverage the resource is going to suddenly be altered. The investors get a pay back, sure, but nothing like they think they could/should get for taking the risk with their capital, not the GOMs.
Based on last year, I would say if they get the rigs certified and on-site, they are going to execute on the drills they want to do this year. If that happens, I like the outlook for where we are going to be sitting at year end. I think the tidbit about PetroChina's apparent cooperation is material and lessons one my my main concerns, that being that they would do something to inhibit MATD during drills or after. Time will tell.
Watched MB's presentation. Overall good, but my take is MATD is having some real issues doing business dealing with the Chinese firms, including being the root cause of why the rig contract is still not in place. I really can't see any other reason for that should not have been completed by now given all the lead time, and it a significant source of concern for me for the entire operation at this point. Even if/when they strike in XX, I am expecting there to be some issues pop up concerning getting the oil transferred into China for eventual payment, despite the seemingly simple logistics due to proximity to infrastructure to so do. It is not the technical challenges; it is the political/business negotiation side of things. On a positive note, for once I don't pin the major 'soft' concern on the GOM! I suppose that will come later on if/when MATD becomes a real player they can tax...
For me, it comes down to the rig contract. I am concerned that they have been working on that since last summer when they announced the deferral of the Block XX drill program, and still have not been able to get that done. I suspect the counter-parties know PM is in a tough negotiating position and they are getting the "treatment" as a result. The cumulative COS are compelling; they have shown that once they get access to a rig they can in fact complete a drilling operation, but you can't drill a hole without something to poke into the ground. It won't surprise me if we get some sort of bad news this year based on the availability of a rig(s) before it is all over. Hope I'm proven wrong, and soon.
Well, so much for 2018. A few thoughts of mine at least:
1. I do not agree that MB is incompetent. Yes, there were delays, and some things didn't come in, but he did drill two wells, including this last one lots of folks were insisting would not spud or not get done due to winter. The fact neither came in we all know was a gamble regardless.
2. I do not agree the second placing was a disaster. Yes, it was bad for anyone trying to play the share price prior to spuds or results, but for long term holders, the fact is he raised capital at 10 P and would not be able to do that now. Where would the share price be now if he didn't have that cash in the bank for next year.
3. My real disappointment is not drilling to two wells this year in XX. One or both coming in were likely, and that would have supported the share price during the two dusters to I am guessing well above 10p. That killed the COS for 2018 when that happened.
So now we wait for 2019. Assuming they drill, I am comfortable with the likelihood of some sort of success, though 2019 will probably not be outstanding but would set a platform to build off of going forward. I am more concerned about IF they drill at all, which I don't put on MB. I put it on a place called "Mongolia". Anything can and does happen there. To me, that is the biggest risk now, not the geology or anything else.
All IMO. Have a great winter everyone!
I was suspecting of bad news regarding Block XX progress for the past few weeks, and my concerns materialized. Yes, it can be spun as good news in the end depending on what happens in the interim, but there was a reason originally MATD wanted to do them this year, and it did not happen.
That said, having invested in Mongolia for many years, I am not at all surprised at this recent revelation. Mike Buck should be given credit for actually getting a significant drill in the ground this year, with perhaps one more to come. He is not incompetent. He is dealing with the Mongolian bureaucracy for starters, and Chinese drill contractors for seconds. I personally know company owners from the west who speak often of how difficult/frustrating it can be to try to do business with the Chinese. Different approaches to what constitutes a "fair deal". Some have even come to the point of deciding it is not worth it to pursue.
The bottom line risk of getting the drills actually done are at least as high as the risk of not hitting something viable assuming those drills happen. From where I sit, I have not seen any evidence of MB being the core cause of the prior risk, and I am going to assume he is pretty good at minimizing the latter. Eyes wide open, I am happy to let this play out for the next year or so due to the potential. If lightning strikes, we may not have to wait a year... maybe just a few more days/weeks. GLA.
1. MATD actually does execute on the six drill program.
2. All drills in the western blocks COS = 20%, all drills in the XX block COS = 50%
Odds of at least one of the drills hitting as per the COS = 100% * [1-(0.5 * 0.5 * 0.5 * 0.8 * 0.8 * 0.8)] = 93.6%
If I recollect my college stats class correctly (long, long time ago), the odds of MATD hitting something on at least one of the drills is as follows (conservative use of COS provided):
100% - [80% * 80% * 50% * 50%] = 84%
The odds of hitting on one of the two basin-opener wells is: 100% - [80% * 80%] = 36%
The odds of hitting on one of the two appraisal wells is: 100% - [50% * 50%] = 75%
I realize the appraisal wells are actually 50-75%, so this should be conservative.
I realize one of the exploration wells may actually be 25%, which would increase those cumulative odds just a bit.
On the other hand, the fact that I own a few shares of this thing reduces the effective odds of any form of success significantly, so please factor that in.