The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Reserves update from M&P (Gross numbers)
2021 Mnazi Bay Gross production; 29,8 Bcf
31/12/2020 -> 2P gross reserves; 445,3 Bcf
31/12/2021 -> 2P gross reserves; 425,1 Bcf
Reserves 'Revision' at year end 2021: +9,6 Bcf
https://www.maureletprom.fr/en/investisseurs/communiques-de-presse
Precipitation down 400-500 mm from last year in the first 3 months of the year, indicating hydro to producess materially less.
https://www.cpc.ncep.noaa.gov/products/international/africa_arc/africa_arc_Jan2020-Mar2020_ea_obs.gif
https://www.cpc.ncep.noaa.gov/products/international/africa_arc/africa_arc_Jan2021-Mar2021_ea_obs.gif
mikkelschmidt90@gmail.com
Hi Mick,
The spreadsheet seems to have reached a standstill of about 38,1 mln shares representing 20,69%. It would be really interesting to hear if your "contact"/institutional investor would agree on the consensus among retailers, could you try and send the list to them? You can download it directly on the docs sheet, or just send them the direct link. https://docs.google.com/spreadsheets/d/1WydFSRGIwjyd9tQQSmndGo_JvQvBgkX9WmHWbuZfz5I/edit#gid=0
If we can get to 20% on a retail count (16,2% at the moment), we only need the largest three institutional to support. If AXA didn't just bought 8 mln shares., then it looks possible just with to large institutional and 25% retail.
Thanks, we're on our way.
There is one thing that I'm afraid of, when keeping the door half open to pursue that growth. When allowing the growth mandate for another year, we risk that the board would rather do a bad deal than no deal, to support their high compensation and elevated G&A spending. Cutting all that away instantly will bring the risk-premium materially down, in my head at least.
It's really neat that you have that contact, that'll come in handy, i'm sure.
Mick, do you know anyone of the large institutional investor, whom we could reach out to, to hear if their consensus in a way matches ours?
Hi Mick
Really happy to see you joining, you're perhaps the only reason I follow this site, thanks to every insight you have brought to the table, I think we're many who do appreciate them. I couldn't agree more in what you are saying, and I take your point, that to benchmark the G&A against the 2017 level is in a sense to easy to accommodate.
I personally do believe that WEN organization aren't capable enough to capitalize on growth opportunity outside organic growth by just sitting on MB as a non-operator (Buying into Ntorya truely sound like an awful idea). We simply don't have the track record and without Eskill, i believe the clear path for WEN is to be the dividend play your taking about, with minimal G&A cost, and that'll also give us the option to be bought out eventually, which also will be more compelling for a potential buyer given the better free-cash flow multiple.
Would you be up for writing a draft with your proposed sort of "ultimatum" I could present to the Norwegian retail shareholder base, or would you rather prefer me doing it.
All the best
Mikkel
Hi everyone,
Some retail shareholders in Norway and the like, are joining forces for the AGM next month on writing some question especially regarding G&A expenditure, to point out that we feel that the board and management not have delivered what they promised, after the delist of OSE and restructuring of the company.
You're all invited to join forces, and add further questions. We're are currently focusing on these; Dissatisfied - about the level of G&A spending, after the promised "substantially less" G&A expenditure at Oslo meeting 2018, due to the OSE delist, shrinkage of the corporate complexibility, closed offices in Mozambique & Calgary, executive management restructure (No CFO & Investor relation), and as we believe an exaggerated level of board compensation, given the fact that we're a non-operator, one asset company (Minimal board work). G&A spending in 2017 was 4,6 mUSD compared to 5,9 mUSD in 2019. We feel, that we should at least be able to get on-going G&A, below the 2017 level.
We're counting shares on a google docs sheet, we're planning to add to mail, you're all welcome to join, and add questions. We've already gathered more than 10 mln shares.
https://docs.google.com/spreadsheets/d/1WydFSRGIwjyd9tQQSmndGo_JvQvBgkX9WmHWbuZfz5I/edit#gid=0
M&P has just released year-end revenue. For TZ they report revenues of 34 mln, which should imply 22,5 mln for WEN share, which oddly enough seems on the high side for 70 mmscf/d. Could we be in for a surprise?
A agree, way to much have been wasted, the past couple of years on the endless endeavour to seek growth opportunities. I think that having Katherine as a permanent solution for now, means that they finally realised that the most curtain way to yield a return on investment , is to focus on what we have and make the most of it. i.e. shrink cost. That's why i'm quite curtain ongoing G&A will be substantially less than the past two years endless spending.
And I fully agree with the strategy, although they seem to keep it to them self. Just sad that they didn't realised it way sooner.
Hi Mick, thanks for sharing your thoughts. If you look at the total operating cost as reported per CPR, 2019 came out just under 13 mln, and budget 2020 just under 15 mln total OPEX. While I share you disappointment about the guidance, WEN's share of P&O incl whether it's booked as cash call or P&O, shouldn't exceed 4,8 mln, according to budget, which they usesly manage to stay within or below, those cash call numbers have a way of mixing it all up, whereas the CPR tells the story much more clearly, and correctly.
Also my G&A expectation is well below yours. If we look aside from 2019 and 2018 G&A, do to obvious causes. Kath mentioned in Oslo that she reckoned we'll be below 2017 figures which came up at 4,6 mln.
That all adds up to direct cost of operation and capex of 14 mln. Which will set us around break even at 70 mmscf/d, with 3 mln in dividend, and the Jan debt repayment. Time will ofcourse tell, the good old days with receivables are over, and to my mind it's time to shrink those G&A expenses, which i'd open-hearted expressed to them in Oslo.
On the flip side should we see a ramp up, we could see a free cash-flow well beyond 10 mln/y, with current capacity.
In Tanzania the winds are changing, and I am very much encouraged by the (re) appointment of James Mataragio as the Managing Director of TPDC last month. We know him well, he is western educated and has been specifically mandated by Magufuli to deliver 400 mscfd to Kenya in 3 years. Whilst that is an impossible task in of itself, the mandate means that JPM is pushing domgas ahead of his re-election campaign next year. We have already seen improvements in pragmatism and speed directly relevant to us.
As you may be aware we pushed very hard on 3 asset deals and 2 corporates earlier in the year - that led to a serious discussion with our major shareholders. The result has meant more pure play focus on East Africa as our major shareholders are comfortable with the jurisdictional risk as such. So it is a slight shift and a smaller playing field to execute on.
Hi Mick, I think those cash calls may have confused your spreadsheet a bit.
85 mmscf/d should according to the CPR net generate 25,5 mUSD without receivables.
G&A should be 25% less than fiscal year 2017 according to Eskil, so around 3 mUSD
Operation cost is budgeted at around 12,5 mUSD gross, that'll be 4 mUSD net to WEN
Capex cost is budgeted according CPR to 4,8 mUSD, and financial cost shouldn't be much more than 700 kusd.
That'll be on the back of the an envelope, 13 mUSD of net free cashflow.
Current Mcap -> 46,7 mUSD -> P/FreeCashFlow of 3,6
Fair value multiple is of course a topic, I'm personally way more comfortable with a Natural gas investment for domestic use with a long payment agreement in inflation adjusted dollars, currently yielding 28%, than a 10 year T bond in Shilling yielding "only" 11,5%. To my mind, the Manzi project should at least be priced to a lower yield than the 10 year T bond because of the dollar assurance.
Also, ManziBay as an investment should justify as a sound investment, even without further investment, to my mind and of course after a thorough analyse, WEN should easily be worth between 100-125 mUSD, as of today, i.e. licens expire after 31, and plateau at todays rate and declining according to CPR.
Mick, the TPDC trade receivables (which is receivables for delivered gas) will not fall as long as production is rising and we still carry TPDC receivables (which of course only comes due a long with production). Those payments of approx. 40% will frist stop when both position is accounted for, and thus we can expected TPDC receivables for another 18-19 month from July2018 at production around 90 mmscf/d. I too was very disappointed about the minor cash build.
Any news from our dear CFO around cash calls? Certainly not from my side, she seems to think really hard about this on. I've walked through the numbers quite a bit times, and the only suggestion adding it all up, is indeed what HighYield concluded about TPDC share of oper. cost and capex, what's later becomes a receivables, plus the fact that June payment wasn't accounted for, and finally the hilarious and frightening fact that our CFO isn't best friends with numbers.
They are allowed to hold AIM shares, just not on what they call "aktiesparekonto" i.e. a much less tax heavy account with certain requirements to regulation. I've looked at degiro serval times, but to my knowledge they grant them self the right to lend out shares on your behalf, is that correct? Otherwise I'm at the same opinion as you that i couldn't care less were it's traded. I just think this kinda market marker environment seems to encourage spreads 10 times what's fair, and make the trading environment much less transparent.
Mick, you should remember that if it wasn't for the norwegian and Artumas, Mnazi hadn't been anywhere close where it is today. All Scandinavian brokers to my knowledge allow trades on LSE, however as we're on a non-regulated AIM next to nobody allows trading on that platform trust me I've tried, and by norwegian law, they are not allowed to hold non-regulated shares in this tax advantage account, and just in general the spread seems out of control, next to nothing volume, to my mind AIM hasn't brought any good to WRL, the capital raised could just as easily been brought through OSE.
There's at least 60-65 mill norwegian based shareholders, so IF the delist is agreed upon, I sure hope they'll stay. I really feel for those Norwegians who's been sitting on their shares for a long long time, and now that Mnazi finally delivers they are been squeezed out at near AllTimeLow share price, do to this delist mis-mangement. That's really unfortunate timing from mangement/board, and as we speak it's creating sort of a bridge between UK institutional+bob and retail Norwegians, which by all means dosen't seems fit as the G&A savings from delist only covers 100kusd + some related legal corporate cost.
Mangement/board/bob should have lead the way long time ago, and reduced G&A/board cost substantially, why should bob eat up 300kusd/year whilst his fellow investors receive next to nothing, I highly doubt his executive position is as time consuming as the salary is indicating. I'm also a bit furious about geoff and lance sign off bonus/"Management restructuring costs", didn't they leave by own choice?.
There certainly seems to be quite a few low hanging fruits, in terms of G&A savings, the delist from OSE at such a big gab between NPV and todays share price is not one of them, especially not with this mismatch between historical high production output from Mnazi compared again with a historical low share price, that to my mind sure seems foolish.
On a positive note, Eskil seems like the right guy for the future, and at least we've got a pretty good horse down the road it seems, although our jockeys has been all over the places at some occasions, Buffett usually encourage betting on the horse rather than the jockey “When management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
They need to forget about M&A activities and a third leg "which kinda look more like a second leg for now", and this BS "offset of jurisdictional risk", as long as our free cash flow don't match up with the CPR NetPresent valuation, which they'll gladly show off at any and all occasions. We all knew at the time we choosed to invest in WRL that there were a bit more risk associated with doing business in TZ, and that we do not need to offset, especially in a probable case wheres it's gonna lower our NPV pr. share. For heaven's sake it's not that difficult to be a non-operating partner selling gas for 3.1 usd/mmbtu with associated cost of 0.43 usd/mmbtu.
I'll do, and i very much agrees Mick