Member Info for KeithOz

Have a coffee first, then work this one out before the time shown on the clock at the end!

CUBE on what used to be known as Twitter:

"SS

PG

GRM

LB

KK

MS

will all soon have one truly gargantuan thing in common.

Tick tock...

Tick tock....

Tick tock..... 🕖"

You may recall that I am very impressed with G & R commentary on the energy markets - here is their latest note on why they perceive commodities in general to be at an historic undervaluation, and what is about to happen. I strongly suggest you read it to the end, apologies it is such a long link:

https://blog.gorozen.com/blog/the-us-reserve-currency-and-commodities?utm_campaign=Weekly%20Blog%20Notification&utm_medium=email&_hsmi=267481784&_hsenc=p2ANqtz-8_SMIEUxWsR2fIYGTFaCUgUxHDoKqc_KFqigsBk9AoPE1gQ1zZ4PannNMTzAmbWpqNP0xKSuValbSiVSeLXlP5UEAB9g&utm_content=267481784&utm_source=hs_email

This has been posted here about a year ago, but for those who haven't previously seen it, here is an historic post from GRH explaining the development and application of this technique- just scroll down a bit for the start:

https://uk.advfn.com/stock-market/london/gulf-keystone-GKP/share-chat?page=5661&xref=chatnav_i_6_t

Interesting that CUBE is today re-tweeting GRH's note about multiple monsters 🦕🦕🦕. Interesting because I understand that both these individuals have seen the hyperspectral data for the Guercif licence area.

Some hints on here over the weekend about multiple additional prospects. I have an extensive archive of material relating to Guercif, dating all the way back to 1934, unfortunately much of this is in technical French. You might want to take a look at this 2014 presentation prepared by Maxim Resources, who at the time held both the Guercif licence, and the Hassi-Berkane (known previously as Beni-Znassen) licence directly to the north of PRD's current area. Much of this is now very out-of-date, so I suggest you go straight to:

p.13 - this shows an impressively large (5000km² !!) Jurassic kitchen to the north and northeast of Guercif town.

p.20 - this shows the extent of 2D seismic over the current PRD licences, together with an intriguing number of prospects & leads.

p.21 - this shows the GRF-1 log, showing possible Tertiary and Upper Jurassic gas pay zones.

p.22. - hydrocarbon seepage study data, showing oil at surface around MSD-1, and thermogenic gas, plus possibly condensate, around GRF-1.

https://cdn.proactiveinvestors.com/upload/SponsorFile/File/2014_08/Maxim-Resourcrs---Hassi-Berkane-Presentation-July-2014.pdf

@schlemiel you said "The flowrates will determine the company's future". While adequate flow rates will obviously be of importance, Paul has stated on several occasions that an industry acquiror is primarily interested in volumes. Those will shortly be revealed by the new CPR. I have just been going through the January 2022 CPR trying to estimate the likely changes due to the activity of the last 18 months.

The last CPR gave a valuation based on resources of 295 BCF nett to PRD, with a G2P setup selling gas at $11.40/mcf. This resulted in $592M (£460M, roughly £1 per share) unrisked. I suspect upgraded resources may be 3-4x that quantity, and the sales price for the CNG component may be 40% higher. The CPR will be 'interesting'.

I'm not religious, but out of curiosity read all the various Big Books. JC had some good advice in the Sermon on the Mount about arguing with trolls on bulletin boards: "Give not that which is holy unto the dogs, neither cast ye your pearls before swine, lest they trample them under their feet, and turn again and rend you." Matthew 7:6. (KJV)

Correction - CNG is 30% combined cos, not 20%,.

Having spent 6 hours in a windy field listening to off-tune karaoke while being polite to intoxicated people and their unruly small children and even less ruly dogs, it is a relief to do some sums in peace & quiet.

The last Fox-Davies note had a rather confusing table showing how they arrived at their sum-of-the-parts valuation. May I try to simplify what they have presented, since the inferences are very interesting to us as shareholders. Even more interesting if you are hesitating about investing, and perhaps are holding back until after testing.

1. 50mmcfgd CNG business. Will utilise just 121 BCF, they give it a combined (commercial x geological) chance of success of just 20% (only 1 chance in 5 it will work), and so their risked (pre-testing) valuation is 13.7p per share. If it does work, then the valuation becomes 45p per share. Values per share are assuming that Paul & Lonny have had all their loan shares repaid.

2. All other currently drilled gas at current CPR estimates. Will use a total of 977 BCF (including the 121 above), has only a combined 14% chance of happening, so that the risked value is 34p per share. Remove the risk, ie flow tests prove that this quantity is actually there, and the valuation rises to £2.39 per share.

The above valuation assumes that less than 1 TCF will be recoverable - let's see what the new CPR has to say, and what MOU-5 might discover in the Jurassic, then we can have another look at those values.

If you disagree - argue with FDC, not me.

Didn't you post the same stuff just a few days ago? Posting it again coz you didn't get any ticks?

* PRD's primary aim is to get a CNG (Note - this is different to LNG) operation up & running, supplying industry such as ceramics & fertilisers (both big gas users), at a price that provides high profit margins. This is likely to ramp up to 50MMcfgd.

*G2P could use an additional 250MMcfgd. It is not at all clear whether SOU & CHAR will actually be able to supply gas profitably and in a timely manner, since both companies have to build complex and costly infrastructure. This is why they have signed indicative preliminary agreements, not final contracts. PRD have the advantage of being able to provide high volumes in a short timeframe, with simple and cheap connection to an existing high-capacity, underutilised pipeline. You are complaining that PRD has not done flow tests yet - neither have CHAR or SOU, so what is your point?

*G2EU is a vast market. The flow direction of the TMP can readily be reverted to its original condition, from Morocco to Europe. As above, connection for PRD to the TMP is cheap and easy, and of course they already have legal rights of access. Are you seriously suggesting to the educated and intelligent folks on this bulletin board that there is not a viable G2EU market?

* The Shell agreement is for CNG, that arrives by ship to a port that is not yet built. It might sound like a large quantity, but 0.5BCM per year is only 48MMcfgd, less than 20% of the current requirements for Moroccan power generation - which will of course increase dramatically over the next ten years. The Shell gas has to come from somewhere overseas to a liquification plant, be transported by sea tanker, unloaded to a facility in Morocco, regasified, then somehow transported to the end users. Do you think that will work out cheaper than indigenous gas?

*You state that it is a problem 'that PRD does not have a decent board'. Progress this year demonstrates to anyone with any knowledge of the O & G industry that this statement is nonsense. You are presumably unaware that Lonny has more experience than anyone of the Moroccan gas market.

1 in 24 trillion? That's amazing, coz I just tweeted a picture of 2 black swans plus 3 chicks.

Https://twitter.com/KQuick20704342/status/1681908906828906497

A few here inc O&W, Dicko, have discussed the likely discount to NPV that a potential purchaser would want to apply. Obviously, they would want a discount, since they would be taking on all the development risk, putting up the cash, and would want to see a profit on their investment. It is important to realise that NPV is just one metric to value a business - what an investor/purchaser is looking for is not just a large absolute return, but a high percentage return on the investment, with as low risk as possible - a high quality NPV if you like, not just high quantity.

The standard NPV spreadsheet also generates an IRR - internal rate of return. I would personally not invest in a project that generates 'only' 30% IRR. Although this would be viewed as a fantastic return on a bank deposit, a bank deposit doesn't have anything like the risk attached as does sucking stuff out of a hole in the ground somewhere in Africa. The inputs that produce a high IRR are the same as those that produce a good NPV - in PRD's case the key issues are low upfront costs and a high selling price producing an immediate profit. Over the last few decades, I have used NPV & IRR to evaluate literally hundreds of projects, I would put those with an IRR of around 100% in the exceptional category. The G2P/G2EU example I used to give an NPV12 of £2.5Bn has an IRR of 386%. I have never seen such a high number, nor such a short payback period. Of course, at this stage it is still theoretical, and dependent upon successful flow tests & commercialisation.

There are of course plenty of other ways to value a company - take a look at the first Fox-Davies note, where they have a table of comparatives using market cap : resources of a list of O & G companies. You will see that the most lowly rated all have readily identifiable issues - high capital costs from being offshore, high tax regimes, big debts, dodgy jurisdictions, etc. PRD is an anomaly in this table - it has none of these issues, but is still very lowly rated - and that is on the current resource based on just MOU-1.

My conclusion is that normally an O&G company at our stage of development might attract bids of perhaps 25% of NPV, but we have a number of highly favourable factors that make Guercif a lot more attractive than most similar-sized projects. Add to that the proximity to the TMP and EU markets, and PRD has an additional advantage of being much more of a strategic fit for many majors than, for example a project in Zimbabwe. I'm sure a company such as Repsol would be happy to pay in excess of 50% of an NPV12, and I'm sure that Paul would not want to let it go for less. At this stage I don't think there is much value in further theoretical discussions, we now need to prove up the volumes and flow rates.

Australia is a big, empty place - I will be mostly off-grid until the end of the month, so will have limited opportunity to post here, but will look in when I can.

I'll just get you wound up for the weekend. Venezuela has an estimated 300 billon bbl of reserves, greater than Saudi. Most of that is in the East Venezuela Basin Province. The primary reservoir is the Herrera Sands, which have been folded and thrust over themselves multiple times - you can find the same oil-bearing sequence twice in the same borehole. Why is this of interest?

Southern Trinidad is also in the East Venezuela Basin Province, and also has a belt of folded & thrusted Herrera sands. Cory Moruga sits right in the middle.

@ Androcles - Nah, you don't want to pay any attention to armchair geologists, Paul said so. Or was that armchair astrologists, not sure? Anyway, exciting news, I've been blocked by Tom Winnifrith, and he's threatening to report Lonny & me to Leicester Police for hate crimes. I expect Interpol will need to be involved, since neither of us are in the UK.

@LifeofPi / BRV. A bit brief since I am off for Friday night out. The slide BRV highlighted includes several other prospects, including one which is another turbidite fan, confusingly at that time called MOU-3 Prospect.

P.22 of the 8th September 2022 presentation also shows among others, the MOU-S Prospect, which is a turbidite Fan. I am struggling to locate the info source on MOU-NW, but I recall that it is the purple oval to the northwest on the base Jurassic map on the upper right of the same page. That page also mentions 4 Jurassic leads. Additionally, the 13th January 2022 RNS says "in addition to the Tertiary gas, which is the Company's near-term focus, MULTIPLE deeper Jurassic oil and gas prospective leads have been identified for future evaluation and drilling." (my caps).

In the Guercif area, uplift and erosion has removed tens of millions of years' worth of strata, meaning the Jurassic sits unconformably on the Triassic. Sufficiently detailed seismic has not been made publicly available for me to even guess if there are viable Triassic prospects to explore below Titanosaurus, although one chart does show some intriguing horizons picked out in yellow. I imagine that management have their hands more than full at the moment without drilling even deeper!

@Edark. Thank you for confirming you are a troll. Goodbye

@edark, @nmike. PRD have been remarkably open with their data releases, even publishing the entire striplog for MOU-2 on their website. My post at 02.47 today explained the technical reasons why no figures have been published for the sand reservoirs. There are also issues of commercial confidentiality, and as someone else has remarked today, I also find it very curious that several new posters should be displaying such an interest in the same commercially sensitive detailed information during a period directly before the company is about to release the full suite of testing results. Since there is a faint possibility that you are making genuine enquiries, I will refrain from suggesting copulation while travelling.

@Moric. You are quite correct that none of the wells have been flow tested. They are all being done together, starting later this month. You are also correct that poroperm has not been released for the sand reservoirs. Not only would release of such detailed information be very unusual for any O & G at this early stage, but PRD would have been unable to test these parameters definitively. This is because the sand reservoirs are friable and contain overpressured gas, meaning that a standard sidewall sample would be meaningless - you would just end up with a handful of sand. Furthermore, high mud weights would mask poroperm conditions and very probably prevent any meaningful estimate of gas saturation - the pores would likely get filled with drilling mud. However, I note that formation gas (that which has escaped into the drilling mud despite the high mud weights) was high at 3% in two wells.

Testing has been delayed in order to ensure the correct strategy, equipment and suitably experienced personnel are available for appropriate testing of these unconsolidated sand horizons; and to save costs by running all testing as a package - no need to fly expensive teams and equipment in and out on three separate occasions. The Jurassic carbonate more closely resemble what most would call real rock, so porosity can be estimated with a degree of reliability.

You have a simple choice - accept the risk of not yet having comprehensive flow and volumetric data and pay a low price for your shareholding; or wait until definitive results and either not buy in if negative, or buy at a multiple of the current price if positive. Since you have a background in O & G finance, you should be better able to make that decision than I can. By way of disclosure, I am fully invested in PRD.

Part 2.

3. Further Morocco drilling. There is some debate over whether finishing MOU-2 is worthwhile at this stage - it will not affect the volumetric assessment, and is not necessary to justify a CNG operation. It seems to me to be sensible to complete it later as an additional producer well. Personally, I think PRD would get most bang for the buck by following up on the Titanosaurus prospect - if testing results are positive for the Jurassic in MOU-4, it makes good sense to get a firmer idea of the potential for this prospect before engaging in negotiations with a potential buyer or partner for PGVM.

4. Management of PGVM sale or partnering. Paul has stated clearly on a number of occasions that if the opportunity is big enough, they will sell all or most of PGVM. The amount of management time and capital required for full development of the Morocco assets is beyond the capability of PRD in its current setup. This sale may or may not include the CNG business, but hopefully will include either a royalty or stub equity, so that current shareholders will benefit from future discoveries. Don't forget that the MOU-NW prospect is a Titanosaurus lookalike on the other side of the Guercif graben, and that other MOU fan analogues have also been located.

5. T & T and Ireland. There is already a low capital-intensive work programme for Cory Moruga awaiting approval & finance, and discussions under way with interested parties for setting up a separate CO2EOR operation. This will only happen after exit from Morocco due to management time limitations. I asked on here a couple of months ago if anyone knew when the Irish Energy Security Review is to be published – a month ago Minister Ryan was still huffing & puffing – see

https://www.oireachtas.ie/en/debates/question/2023-06-15/74/

If this ever gets released, I would hope there is a fair chance that PRD's 50% stake in Corrib South will be snapped up by Vermilion Energy, operator of the Corrib gas field. That should bring in a penny or two.

Lots to look forward to, I would greatly appreciate others' comments and opinions.