Adrian Hargrave, CEO of SEEEN, explains how the new funds will accelerate customer growth Watch the video here.
The market does not seem to think Chariot has any value! In fact it thinks that its management is capable of destroying value, even when that value is made up exclusively of ... cash!!
Some of the forgotten Falkland companies (or the elephant scale projects as Chariot management like to call them), e.g. Argos, have a market cap that's a multiple of their cash pile. In the case of Argos that price to cash ratio is over ... 8.
Maybe an idea to put that very issue to Chariot management at the AGM and see what they say? Some people prefer to complain in here but keep quiet at AGMs.
As of 23rd June Hargreaves Lansdown (HL) is still there. Lansdowne Partners could also be a seller. If we have the previous table it'd be easy to tell to what extent they have been sellers recently. In aggregate, they still held 10% as of the date of reporting. My guess is that percentage keeps going down.
Also Blackrock have gone. Perhaps they had bought part of the shares related to the firesale by Woodford. Under different circumstances there would be some cause for concern.
https://www.4dpharmaplc.com/en/investors/shareholder-information
So up to a maximum of 10% to go (maybe less if they are selling daily) ... assuming that HL and Lansdowne Partners are sellers. In any case, real news (as opposed to TR-1) should be imminent.
By now they must have a very good idea as to whether the current trial will report positive news or not - if positive, results could be anywhere in the scale of mildly positive to very positive. Whereas it is highly unlikely that all 100 patients saw some benefit, "successfully treated" must have been referring to the fact that they received the treatment and conclusions can ultimately be draw. However, would you be firming up the timing of the trial outcome if you hadn't seen sufficiently good evidence of some desired results?
Have selected some extracts from broker's (Finncap) report as of today 17th June. They have valued Anchois at 59p (unrisked) and have maintained 22p as the target price for Chariot - my guess for the difference between 59p and 22p is that the latter includes a risk factor, Chariot has 75% interest in Anchois and would probably have to give away a substantial part of the revenue / profits / value to partners. Also the 22p maybe a target for the 12 months or so. In any case, I'd be happy with a fraction of 22p.
" Our risked-NAV remains unchanged at 22p/sh following FY 2019 results. It is worth noting that we ascribe no value to any of Chariot’s oil prospects in Namibia, Brazil or Morocco within our risked-NAV at this point due to the depressed oil
environment. Moreover, we have only included the four lowest risk of the 12 identified gas prospects on Chariot’s Lixus acreage: Anchois A, B and C sands plus Anchois North. These represent gross resources of 731 bcf, around a third of the total 2.2 tcf identified so far on the block. We have also applied a 25% commercial risking to these prospects, on top of geological
risking, to account for the need to bring in a partner to help fund future activity. Clearly then the Lixus block alone represents a major opportunity for Chariot, which will materially benefit the shares if a successful farm-out can be achieved in the coming months. "
"The Anchois gas field development targets production of 53 mmcfd, which at US$8/mcf would deliver revenue of ~US$150m p.a. and pay back development capex in 2-3 years. The economics of such a development are extremely robust, helped by a 10-year tax holiday from production start-up. We estimate Anchois alone could be worth ~US$280m,
or 59p/sh to Chariot on an unrisked basis."
"In Namibia, up to four third-party wells are expected over the coming 12-24 months:
?Total is drilling the 2+bn bbl Venus prospect on PEL 56 in the Orange basin in 2020.
?Maurel & Prom is also expected to drill a well on PEL 44 in the Walvis basin in 2020.
?Shell/Kosmos are planning a well on PEL 39 in the Orange basin in 2021.
?Galp/ExxonMobil are also believed to be planning a well on PEL 82 in the Walvis basin."
"Success with any of these would greatly increase Namibian farm-in interest, especially
the Maurel & Prom well, which is on a block adjacent to Chariot’s Central Blocks.
In Brazil, third-party commitment wells on neighbouring blocks in the Barreirinhas basin
are also being closely monitored – Petrobras has announced plans to drill the Guajuru
prospect in Q4 2020. As drilling results emerge from this underexplored basin, Chariot will
look to re-initiate the partnering process to fund a well on the 911mmbbl Prospect 1
stacked exploration targets. Finally, in Morocco, the Company is reviewing its Mohammedia and Kenitra licences in
light of the industry’s reduced appetite for high-risk, oil-focused exploration drilling. "
Agreed preciousmaj.
Apart from the timescales that drag on and on, one of the reasons that the credibility of this company is badly dented is that the directors and CEO in particular:
(i) seem reluctant to communicate effectively with shareholders, despite the ever-extended timescales for some sort of tangible outcome, in the case of Lixus or elsewhere.
(ii) their agent to deal with investors doesn't seem to understand well the company and defends their (not impressive) track record with broad brush statements and in a cavalier way (spoke to them towards end of Q4 last year after a lot of chasing)
(iii) CEO has been benefiting from excessive and unjustified share awards at nil cost and that carries on: as per my post earlier today, either you take a pay cut or you don't. It's not on for the CEO to award himself shares at rock bottom prices to pay for the -long overdue- pay cut.
It would be very helpful to see a change in attitude and behaviour towards shareholders by the directors.
Namibia and Brazil have become lottery tickets and there should be a 10%, possibly a lot more, chance of success per drilling project i.e. not bad especially when others take the risk and undertake the cost. If a farm-out isn't an option then waiting for others to take the risk makes perfect sense when you have limited resources.
So if the expected revenue is US$150m and the payback for development costs 2-3 years, we are talking about an investment of US$300m to US$450m. The economics are very attractive and there is no way of CHAR going it alone with some project finance type of deal. So here are some thoughts:
- could some development partners/suppliers/engineering companies be (partly) paid through a stake in the field / share in future revenues ? i.e. some for of self-financing. After all, the RNS talks about interest from a wide variety of putative partners.
- "Chariot is also evaluating new leads, identified during technical review, with companies participating in the partnering process" ... good! so there are companies in the partnering process with which Chariot is sufficiently engaged to be exploring new leads.
- Following on from the previous point, it may well be that the partnering process involves different types of partners at the same time e.g. one could be an oil and gas company, another party could be an engineering company or "mid stream service provider"
- Early talks with players in the Spanish gas market (not only Morocco) is a very positive sign. Could one of the partners come from Spain? The size of the field may not be enormous, but a player like Repsol may want to be seen to be associated with the project.
So overall positive developments but directors need to be realistic in their expectations and be aware of the clout of a company whose market cap is in single digits vs a project that needs close to half a billion dollars of financing. Furthermore, the CEO has to demonstrate some appetite for risk in the company he manages and stop taking free shares at a rock bottom price even if they are part of a pay cut deal. Either you get a pay cut or you don't.
So with a dose of reality and with some wind in the sails through improving energy prices ... a first deal - could be a staged development - may not be far away. After all, if it doesn't happen by say September, will it ever happen?
CHAR needs an industry player with sufficient expertise and resources as a partner. Now, it could be a major or a medium-sized player with deep financial resources. If we were to give CHAR the benefit of a big doubt, such industry players may have shown interest but covid / low energy prices may have played a role in slowing down negotiations. And/or, CHAR may have had unrealistic expectations without the credentials to support them. We are where we are ... in my view, by far the best way to get maximum value out of the assets is to put all the assets, or the company, up for sale. Putting the company up for sale would only make sense if current management were not to carry on under the new ownership structure.
BouncyCat
"If debt financing produces much better economics than partnering with a major or large independent could, then I wouldn't see that as a failure." ... on paper and in theory yes. Frankly, given performance to-date, any sign of remote progress would not be a failure!
Chariot's management team are an unproved entity and from what we've seen to-date they haven't demonstrated any capability to that extent. Going it alone is for experienced companies with necessary resources. Besides, if they are hoping to get debt financing or other form of project financing, that would be cuckoo land territory.
As for the statement "track record for delivering low cost drills is very good" ... I think it could be paraphrased to " track record of high risk, low cost flops - without having ensured a risk sharing arrangement in place via a farm-out- ...is indeed very good"
The track record of false starts, repeated failures to deliver meaningful progress news - with the exception of that ENI partnership - and consistent destruction of shareholder value have become the norm and under no circumstances can be attributed to bad lack... after all those years.
If management continues to be self-righteous, detached and unwilling to learn from its unsuccessful past, then it's likely that timelines will keep on dragging on and on - possibly there will be more dilutions and eventually CHAR could face the risk of Lixus license revocation (without having seen the terms of the license).
They just have to be pragmatic and understand that some TIMELY deal, even with concessions to the farminee partner(s), is so much better than no deal.
Doing it on their own?! If history is anything to go by, that would mean disaster! A company that hasn't delivered so far and having demonstrated lack of sufficient competence, why would they deliver now? Have they been on an MBA course? :-) ... But if they attracted ENI in the past, perhaps they can do the trick with another major?
Ok ... would they have raised £22m by 18th Feb at 50p, even when the coronavirus had hardly come to Europe and before 4D's announcement of 20th April if they were not rated by the market? Also, the company certainly has funds to get to the next short to -medium term milestones.
Really don't agree though it is disappointing to see the 40s returning. Today life science companies are significantly down (largely indiscriminately) and, in particular, those that have even a loose covid connection (e.g ORPH, NCYT, N4, SNG, TILS, AVCT), whereas certain banks and energy companies are up. Meaning we are leaving covid era behind us and heading towards normality and stronger economy... market appears to say today. Though, as we know, 4D is much more than a covid share.
There are plenty of dogs in the AIM and especially in the oil and gas sector whereby directors sometimes, are mostly looking after their own interest e.g. despite years of no progress by, effectively, awarding shares to themselves after a share price crash (notably Chariot Oil). However, DDDD is certainly not one of the AIM dogs!
Lack of credibility for not having delivered for a number of years (since ENI partnership) would play against Chariot and the terms it can agree. Some deal should be possible though and the recovery in the oil and gas prices should help. At this very late stage, if they don't manage to do a farm-out (or other type of agreement) in the next 2-3 months, begs the question whether they'll ever manage to do something. But, best solution would probably be to put the company up for sale and for current management to resign.
It's probably a very speculative Buy at the moment thanks to the gas assets and the very low share price. Having said that, isn't it incredible that even at such low share price, reflecting cash in the bank, we haven't seen director purchases (outside closed periods, not necessarily now). Do the directors believe in the company or even in their own ability?
Some thoughts that I'd like to bounce off the board:
- Most importantly: initial evidence of clinical benefits in one of the oncology programmes is extremely promising: "clear signal of therapeutic benefit in RCC") ie renal cell carinoma and "proof of concept" for the synergy between single strain biotherapeutic and immune check point inhibitor (as per slide 17)
Also, 25% clinical benefit in preliminary responses in RCC and non-small lung cell carcinoma (slide 16).
Clinical efficacy in both RCC and NSLCL (slide 10)
Full evaluation to be carried out after a sufficient period of time has lapsed.
- As for covid, looking at current developments, any therapy is likely to be one involving a combination of treatments. Well a biotherapeutic, that was going to demonstrate even a partial benefit, should be easily added to the mix of drugs, as it doesn't add to toxicity. Ditto for cancer or other programmes.
- Any seller(s) can't have long to go as we haven't received an RNS mentioning percentages for some time. So they must be below the threshold for reporting.
- It would appear that sells have been going on in waves. Any time they seem to stop, the share indicates strength and with the exception of one day, it's stayed above the placement price of 50p. To state the obvious, bodes well when the sellers are done which for the reason above, can't be long now.
- The company shows that it means business not only on the trials front but also on the communications front and is not going to stay under the radar until it can announce some final success at the end of a trial. The RNS today is only a small evidence of that.
- Have said before, I'd be more concerned if Blackrock decided to get out. I am a lot less concerned if a couple of IIs have sold for reasons that appear to be related to urgent liquidity needs.
Well, for the current phase and until we have some headline news the share price seems to have got a floor at 50p. Minor news here and there - assuming they are mostly positive- and in the absence of seller could drive the share price. So looking substantially north. So looking forward to the summer and the rest of the year.
Agreed Spicey. What's very interesting is that the share price used to be a high multiple of what it is now, even when with the various programmes being at a much earlier stage than they are now! Ok: there may have been the odd relatively small placement. But with some de-risking of the various programmes having taken place in line with progress, the SP is at very attractive levels. And, as far as I'm aware, there haven't been any major failures in its programmes to-date. But the share was in Woodford's funds and there was a fire sale at some point.
https://citywire.co.uk/investment-trust-insider/news/woodford-sell-off-turns-up-heat-on-james-henderson-s-hot/a1245620 ... seems like Woodford had as much as 27% at some point. Ditto for Lansdowne: much more recent rushed selling though to a smaller extent than Woodford.
So effectively, it looks as if we've benefited from a price that crashed mainly for reasons unrelated to the performance! Not a bad deal, is it?
Thanks and agreed. Couldnt resist and have watched for a few minutes here and there - will watch later more carefully. Seems a very effective AGM presentation indeed which coupled to oil price rises has brought about this rise. It seems that service companies can help them address their lack of experience in being operators. That's if they won't have partnered with a major or an experienced operator before that or ... taken over.
I don't think I'm selling on the rise then! In fact, will probably look to buy more.
Rumour for a bid?
.... who expects to see later today the same welcome, but surprising, SP rise as in the last hour yesterday
It may be that the market expects some announcement in the next few days or at least in the course of June.
Why would a company of US$200bn market cap team up with a niche player of US$80m (i.e. 2,500 bigger market cap!) when it comes to one of its flagship drugs under trial, notably Pembrolizumab (Keytruda)? From the Daily Mail article, referring to bowel cancer, it seems that there have been some good results, but they can certainly be improved e.g. "More than one in ten patients saw cancer disappear altogether, new data claims". It is with the target of those improvements and synergies in mind that Merck has chosen, perhaps, to team up with 4D in the case of Keytruda in other types of cancer trials. And it would be ideal if such improvements on their drug were brought up by a biotherapeutic as opposed to other drugs that could bring about nasty side effects.
Also, Merck has taken a small stake in this niche player and they've embarked on a collaboration programme re vaccines. Biotherapeutics could be a huge area in the future and Merck has decided to choose 4D as one of its partners. Surely, they must have done their due diligence. Maybe the amounts involved are very small change to Merck when it comes to buying a stake, but would they have randomly chosen to put their name next to a player in biotherapeutics?
In the same vein, I raised with the company the other day the scope for increasing awareness and visibility of DDDD in the market as well as attracting more sector-agnostic investors through perhaps improved communications and in line with progress in the pipeline. Here is the response:
" In addition, you may be pleased to hear we have recently engaged a partner to support our communication activities and raise awareness of the ground-breaking work being done. In particular we are conscious of the need to engage and educate as you say sector-agnostic investors. We are actively developing a programme of increased communications covering a range of topics and through a variety of media. Again, we are focussed on building the long-term reputation and profile of the company through high quality, relevant and timely communications, promoting our world-leading science and attracting a loyal investor base. "
So the company is stepping up its communications strategy with the market which bodes well for the future in terms of attracting more visibility. Some of us are slowly but surely increasingly appreciating the potential of this company, which claims to be one of the world leaders in the biotherapeutic space (if not the world leader) and targeting different areas from cancer to asthma and covid-19 with non-toxic drug-like micro-organisms. Imagine the impact on society and valuation prospects as one or more of those programmes come closer to proving successful.