Member Info for KeithOz

You wouldn't drive it across war zones. It would go from Tunis by boat via the Suez Canal to Dar-es-Salaam.

It has been suggested to me that I finish the valuation of the Moulouya Fan that I started earlier in the week, based on the price that BP & ADROC were offering for 50% of NewMed Resources. Remember the key assumption – that PRD gets three wells producing on the P50 resource. I will add to that some pricing and profitability assumptions that are based on pp 6 & 7 of the PRD 8th September 2022 presentation – that CNG sales at 50mcf/day are $16/mcf, with $10/mcf profit, and gas-to-power sales at 200mcf/day are at $12/mcf, with $6/mcf profit. For the target 250mcf/day, this gives an average profit of $6.8/mcf

For NewMed, sales are $5/mcf, and after tax & royalties retain $2.2/mcf profit.

Other factors: PRD gas is onshore and shallow, and is easily recoverable, so I will conservatively assume that 75% of GIIP is economic. NewMed gas is offshore and deep, so I will suggest only 67% is recoverable. I do not have enough information to calculate the forward effect on profitability of NewMed drilling a whole bunch of deep wells, but assume the figures below overstate the profitability for NewMed.

The new numbers to calculate relative profitability are therefore (6.8 x 0.75) / (2.2 x 0.67) = 3.46. So average profitability for the same volume for PRD is three and a half times that of NewMed. Remember that the offer is for $350M per unadjusted NewMed Tcf. We adjust it by the number above: 350 x 3.46 = 1211. PRD's P50 resource of 1.823 Tcf should therefore have an industry market value of 1211 x 1.823 = $2207M. With 400M shares in issue, that is $5.52 per share, or £4.44.

Just for the Moulouya Fan.

Anyone who feels like shouting this down, please also provide your detailed assumptions, references, and calculations. If you can't do that, it is just empty shouting.

I am posting this now for a reason. You may have concluded over the last couple of weeks that several posters with industry knowledge and connections have good reason to believe that certain third parties are running the financial rulers over PRD.

A number of posters here maintain private contact and exchange information which cannot be published publicly for legal or confidentiality reasons. They also believe that carefully coordinated measures are being taken to counter any opportunistic action. If an opportunistic offer were to be made, it is important to have a realistic idea of the potential value of the shareholding you own.

It's entirely up to you if you believe this to be true, or think this is just a stratagem to boost the short-term share price which you believe has slumped as a result of management ineptitude. Your money, your choice.

Enjoy the rest of the Easter break, don't eat too many eggs, nor (surprised that it seems I have to mention it) take too many drugs!

" 'little' Nige (6'2" btw). " - I assume that those are two separate measurements.

The four trades of 300K and the two of 315K are quite clearly paired buys/sells, all to do with tax crystallisation. If you want to believe that the RNS is all a sham to 'soak up placing shares' I suggest you join QAnon, you will be in good company. As I stated before, Noble have to release the rig booking status in order to secure a farm out agreement. No conspiracy needed.

@Aimster - you keep coming up with Aminex, as if the two situations are in any way comparable. They aren't, as has been pointed out to you in detail by other posters on each occasion you have tried to present this fallacy.

If you actually read the Noble releases, you will see that Phase 2 of the farmout process may not take very long - initial DD has already been done, what they now have is confirmatory DD of the actual documentation that they have already seen in summary - an audit, if you like. Preliminary terms have already been discussed in order to arrive at a shortlist. My main caution is that the larger the company farming in, the longer it will take to get formal agreement - that is certainly my experience from three decades of business development.

It's a letter of intent at this stage because Noble doesn't have the cash to be able to sign a full contract. However, having a rig LoI is a big help to Noble to secure a partner on favourable terms - if you were a farminee without your own rig, the lack of Noble's access to one would be problematic. Everything should start to move more smoothly from now on, looking forward to a full contract signed in blood, with penalty clauses.

You may recall on 9th January TXP announced it had divested its non-core Trinidad assets in exchange for some areas closer to its existing Ortoire prospects. It is therefore instructive that TXP chose to retain their interest in Cory Moruga. Some TXP people consider this a very interesting field - it is in the Herrera turbidite sands fairway, which in itself is an extension of the main Venezuelan oilfields. It also appears to be overthrusted - meaning that the same sequences have been pushed over one another, possibly giving multiple stacked plays. Lastly, unlike the majority of T & T oil, this is light sweet crude, which is in demand because of its lower processing cost.

Paul is very familiar with this field, since he has worked extensively on the adjacent field assessing CO2EOR potential - one prospect of which extends into Cory Moruga. I look forward to the CPR, which I expect to be 'interesting'.

It would be a good option if one of the companies already operating in Tanzania were to be involved - Shell / Total / Statoil / Equinor / M & P, but I wouldn't call any of them state-owned.

I wonder if folks are missing a trick here? Yesterday's statement from Noble included this: "Participants in Phase 1 of the farm-in process included a diverse range of parties spanning downstream companies, state-owned petroleum companies, private investment groups, mid-cap and junior oil & gas companies..."

If I were running the Noble farm-in, I would be giving preference to entities who can supply more than just cash - for example, a state-owned petroleum company shouldn't have a problem coming up with a suitable drilling rig & crew.

""This is an extremely congested period of operational activity in Morocco for the Company during the next two to three months that has to be carefully managed and scheduled to ensure execution in an efficient and cost-effective manner." - Paul Griffiths.

I wonder what are the reasons for that? Doubtless the usual suspects here will claim management ineptitude. It's quite the opposite.

Correction, part 1, para 2. You know that TCF = trillion cubic feet, not billion. Too many -illions!

Part 2 - Trade Comparator.

Last week we saw that BP and ADNOC (Abu Dhabi National Oil Company) were offering $2 Bn for 50% of Israeli gas company NewMed Energy (formerly Dekel Drilling).

https://www.reuters.com/markets/deals/adnoc-bp-bids-interest-israels-newmed-energy-2023-03-28/#:~:text=LONDON%2C%20March%2028%20(Reuters),into%20Israel's%20growing%20energy%20sector.

Can we use that industry offer figure to read a valuation across to Predator?

Not everyone here will be up to speed with all the terms used in the references I cite, so:

cf = cubic feet of gas, cm = cubic metres of gas, 1cm = 35 cf
m = thousand, mm = million, B = billion, T = trillion
Btu = British thermal unit, 1mmBtu = 1mcf
ILS = Israeli Shekel, 3.6 ILS = $1.

NME own 45.3% of the 22.9 Tcf Leviathan (Israel) field, and 30% of the 3.46 Tcf Aphrodite (Cyprus) field, so 11.4 Tcf attributable to them.
https://newmedenergy.com/operations/
At $4 Bn implied value for the whole company, this is $350M per Tcf.

Key assumption – if you don't believe this why are you here? PRD proves up and commercialises the independent CPR P50 (most likely) figure of 1.823 Tcf for MOU-1, -2 & -3: 2nd table in 17/02/23 RNS: https://www.londonstockexchange.com/news-article/PRD/placing-to-raise-ps2-million/15879535

That would give PRD a value of 1.823 x 350 = $638M = £515 = £1.28p per share, just for the MOU-Fan.

Or would it?

The development & production costs for Leviathan are horrendous – 130 km offshore, water depth of 1500m, 1st well to 5170m, 2nd well to 7200m depth. Cost of 1st well in 2010 was $92.5M – now factor in inflation, and the fact that lots more development wells are needed. A lot of that 22.9 TCF is not going to be extracted because it will be uneconomic.
https://en.wikipedia.org/wiki/Leviathan_gas_field
PRD wells are $3m a pop, within spitting distance of an unused 48” pipeline directly into the EU.

Paul believes he can sell gas at $16/mcf for CNG, $12/mcf for gas-to-power. Israeli gas peaked at $8.79/mcf in June 2022, latest price I have is $5.5/mcf for December 2022.
https://www.indexmundi.com/commodities/?commodity=natural-gas&months=120

How about taxes? Morocco has zero for the first ten years, then 5%. What does NME pay Israel? - grab a box of tissues – 23% Corporate Income Tax PLUS 12.5% Royalties PLUS 20-50% Petroleum Profit Royalty.
https://www.energy-sea.gov.il/English-Site/Pages/Regulation/Fiscal-Terms.aspx

Clearly not all Tcf's are worth the same! If an Israeli Tcf is still worth $350M after application of all the above, how much do you reckon a Moroccan Tcf is worth to a buyer of Predator? Multiply by 1.823. Then add in the rest of Guercif (expect shock & awe for the MOU-NE CPR), T&T (expect pleasant surprise for Cory Moruga CPR) and a possibly revitalised Ireland. Divide by 400M.

The answer is a lot more than 7.5p.

Part 1 - Using an NPV

If you are a genuine shareholder of this company, presumably it is because you believe that its true value is not reflected by the current market capitalisation. It is therefore perfectly reasonable that industry players could assume the same.
The key issue is what is a fair price? How much would a third party be willing to pay, and at what price would you be willing to sell?

Some attempts at valuation have been made here. One recent one was based on a fully discounted (Net Present Value) of $2 per mcf (thousand cubic feet of gas) after a commercial chance of success of 25%. De-risk this, you get $8 per mcf, or $8 billion per Tcf (billion cubic feet of gas), multiplied by the P50 (most likely estimate) of 1.823 Tcf from MOU-1, -2 & -3, gives a value of $14.6 Bn, or £11.7 Bn. With 400 million shares in issue, this leads to a figure of £29.25p per share – just for the MOU-Fan.

While this may be arithmetically logical, I have problems with NPV based forecasts.

It is easy to manipulate an NPV since it is reliant upon a number of assumptions, including upfront capital costs and their timing, sales values and volumes and their timing, margins, taxes, and discount value (cost of money).
A seller will always assume optimal numbers and timings to produce the highest figure.
A buyer will always assume that things can and will go wrong, and do their calculations on downside numbers and timings.
Things change. Inflation is playing havoc with all of these factors – a little over a year ago, inflation was zero, and a 4% discount rate was commonly used. Capital items and ongoing operating costs are now escalating at double figures, and discount rates of 12%+ are now being applied. Result – huge difference in NPV.
Projects that are some way from production commonly sell for a fraction of NPV, to account for the many and varied risks, known and unknown. Even projects that are producing with a stable cash flow sell at a discount – a potential purchaser will want to make a profit from the deal.

So where does that leave us? We are fortunate to have a recent transaction to give us some guidance on what the industry thinks is a fair price. Details in the next post.

Vermilion now has leverage with the Irish government. Although it supplies 100% of Irish domestic gas production, this is only 20% of the Irish market - 80% is imported. With existing infrastructure, Vermilion is able to process three times as much gas as currently, i.e. 60% of Irish gas needs, but this is limited by Corrib field production.

PRD's Corrib South and EOG's Inishkea fields are adjacent to Corrib and its infrastructure, so would provide valuable extensions that would help better utilisation of existing processing capacity. This would be of considerable value to Vermilion, who must now be in a strong position to help PRD & EOG twist the government's arm to approve the Successor Authorisations for these two licences.

That's OK then, I was worried it might have been "how old is your daughter?"

Something I forgot to add - I have suspected for a while that the Pilbeam affair revolved around this issue - Ron, as Project Development Director, wanted to shout about the great discovery he perceived himself as having made, the other directors preferred a brief and highly technical announcement that gave away the minimum of commercial information.

@Porters - there is a huge gulf between the trolls' trope of "incompetents unable to organise a p-up in a brewery" and my suggestion that two highly experienced and skilful guys are carefully coordinating multiple complex projects in order to maximise shareholder value. I am suggesting the radio silence is there for a reason - Machiavelli again: "No enterprise is more likely to succeed than one concealed from the enemy until it is ripe for execution".

My mentor and famous O & G consultant Niccolo Machiavelli thinks that Paul & Lonny know exactly what they have at MOU-1 and MOU-2, don't want to finish either job until all the ducks are in a row, and are delighted that lab mud testing and Moroccan explosive transport regulations are enabling them to achieve their timing objective. Of course, I don't think that.

Jimmy has proposed an elegant geological scenario for the timing of drilling & testing, there may also be a sound commercial rationale for proceeding in roughly the same order. Usual disclaimer, this is only speculation on my part.

The folks on this bulletin board are not the only ones who perceive there to be a significant disconnect between current price and potential value. Paul has mentioned on a number of occasions that he is concerned that someone might try and take PRD out before he has a chance to demonstrate full value, particularly with the Moroccan assets. He has hawked the project round to a number of interested parties, and we have seen recent O & G corporate activity is starting to ramp up once again.

For a major to be interested, especially if it involved a hostile takeover, they would have to be in possession of a lot of information - in particular enough to be able to calculate future cashflow and hence a fair price. A proven flow rate of say 25mmcf gas per day from MOU-1 would be a good start for such calculations. A hostile bid at 20p per share - a very substantial premium to today's price - could well be attractive to a lot of holders interested in a quick and easy risk-free profit. Of course, many of us would be very unhappy with this, since we do not believe it represents future value, but it may be enough to secure control.

How can PRD defend against such a scenario? The answer is to provide outsiders (that includes us) with as little information as possible that could be used for takeover purposes, until enough detailed information is available for a strong defence that demonstrates the true value of the project. Obviously critical information that could affect the share price has to be released to the market in a timely fashion - so the way to minimise risk is to make the time window for total information release as narrow as possible.

One way you could do this is to have all the important actions happening simultaneously, or at least in a very tight sequence - for example;
2nd/3rd week of April - Finalise draft, but not issue, CPR for MOU-NE and Cory Moruga
4th week of April - test MOU-1 and finish drilling MOU-2
1st week of May - start drilling MOU-3, raise some cash one way or another for testing of MOU-2 & -3
2nd week of May - test MOU-2, finish MOU-3
3rd week of May - test MOU-3
end May / start June - incorporate latest findings into a revised CPR issue for the MOU-Fan
mid-June - release comprehensive CPR that includes full third-party statement of value of both Morocco and T & T assets
late June - open data room for potential acquirors of, or farminees to, Guercif licences.

The order may be slightly different, but you are open to hostile activity for a very short time, and even then you have a very solid defence that comprehensive valuation data is in process.

Next Investors are starting their NHE pump campaign:

"We have observed that small cap gas explorers’ share prices run in the lead up to big drilling events. Generally the bigger the potential prize, the bigger the speculative run. We Invest early and patiently wait for the run and the drilling result. We try to partially de-risk before the result then hold the majority of the position for the outcome. Sometimes it works. Sometimes it doesn’t. After a quiet sideways period prior to drill preparation, the share price run usually starts to build slowly in the months before drilling begins. It starts as the company announces tangible progress towards the all important drilling event…

Big potential prize

Noble Helium (ASX: NHE) has a giant unrisked mean prospective resource of 176 bcf in Tanzania - which according to NHE is the “best untested helium system on the planet”. NHE is now less than 6 months away from drilling. The mean prospective resource is 5 times the size of the now depleted US federal helium reserve.

In Q3 NHE is going to drill test its prospective resource via two high impact wells - together they comprise a 16.5 bcf unrisked mean recoverable helium volume. NHE’s two drill targets are independent of each other and were chosen for their high probability of discovering gas-phase helium. Either well could deliver a “company making” result in their own right.

NHE share price finally waking up?

NHE’s pop out of its long term range started a few weeks ago. It finally kicked out of the ~15-16c range in which it has been trading for the last five months. As we get closer to Q3, we expect NHE’s newsflow to increase - that started last week when NHE revealed its two first drill targets. Hopefully this is finally the start of the pre-drill run we have been waiting for since we first Invested in NHE nearly 18 months ago. Our Initial Entry Price 16.3c. As we get closer to Q3, we expect NHE’s newsflow to increase - that started last week when NHE revealed its two first drill targets. Hopefully this is finally the start of the pre-drill run we have been waiting for since we first Invested in NHE nearly 18 months ago. Our Initial Entry Price 16.3c.

Our Big Bet: NHE discovers the world’s largest helium reserve held by a single company and is strategically acquired by a major company OR a state owned enterprise to secure supply (USA, China, Qatar)."