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@Fernan10 - more accurate and up to date than my back of the envelope calcs. Thanks for taking the time to do so.
I think ONHYM formally signing off on the farm in is what is causing the nervousness here - at least from my perspective. Not that they wont, but how long will it take.
Monday would be a nice day for an RNS.
@thebold
https://www.cailaw.org/media/files/IEL/Publications/2015/acquiring-upstream-vol9no3.pdf
Pages 4-9 address how carried working interests are usually dealt with in these sort of JVs. I would be extremely surprised if Chariot had negotiated a contract whereby they can allocate centralised corporate costs, or costs from other parts of their business. Moreover the RNS specifically addressed what the $85M would cover:
Energean agrees to carry Chariot for its share of pre-FID costs (which are recoverable from
Chariot’s future revenues,see terms below), up to a gross expenditure cap of $85 million, covering:
o drilling of the appraisal well; and
o all other pre-FID costs; and
o up to $7 million of seismic expenditure on the Rissana licence.
You are right - I believe hardly any of Chariot's operating expenses can be allocated to the JV. I think what you are conflating is the costs incurred that have been recognized as 'exploration and evaluation costs' in their financials (approx $20M in 2022). These have not been expensed, but have been recognized as a current asset under IFRS 6 - this is separate to the approx $1M per month cash burn I'm talking about.
Hope that helps. Again, thanks for the insults.
@thebold - I'm afraid you are just wrong about 60-70% of costs being recoverable. Only directly attributable, allocatable costs would be covered under the agreement. If you look at Note 3 to the financial statements (2022) - you'll see the vast majority of the costs are attributable to both the transitional power, and corporate segments. These will not be recoverable. But thanks for the insults and name-calling as always.
@thebold - I mean I just posted my thoughts around my projections for their cash position and concerns around delays increasing the risk of requiring an interim fund raise, and asked for others' thoughts. You responded with 'FUD'. I'm trying to have a debate here.
@thebold - you must still be upset that it turns out the $85M carry to FID didn't include Chariot being able to immediately claim back the $40M or so of estimated costs Chariot had spent to date, as you were telling people on telegram it meant in the days following the deal announcement. What's the acronym for the opposite of FUD? HEN? (hope, excitement, naivety?)
I might be over estimating the burn rate in fairness. $4M of their opex is share based payments (non-cash). So $1M per month burn rate, should put current cash around $12M give or take. I still think it's too tight to proceed with onshore drilling without them being very confident of an imminent (next few weeks) approval from Morocco.
It would be nice to think that the sp performance is as a result of one seller, but I'm sure it's more to do with the increasing likelihood of a raise.
Chariot had cash of approx $21M in July 2023. Cash burn rate is approx $1.4M per month. So runway is about 12 months, or until about July 2024 assuming a constant burn rate, and not wanting to go below a minimum cash balance of 3 months' opex . Put another way, cash on hand is probably about $8-9M right now. Chariot either has to 1) wait for the $10M payment from Energean (therefore waiting on Morocco to approve farm in) 2) delay Loukos drills or 3) raise money now (@6p?). I suspect the least painful option is a combination of 1 & 2, hope for success at Gaufrette, and then raise at hopefully 10p+ plus following that.
Maybe Morocco comes good and approves the deal tomorrow/next week and the sp should see a decent bounce. Or maybe AP loans the money to Chariot to throw shareholders a bone.
Thoughts?
@BDC
If Loukos drill commences in Q1, AE drilled by end of H1, and FID taken by year end then I'll be extremely happy. Moreover I will apologize to you for my skeptical take on our present position.
I do note however, that back in November 2022 you stated 'First gas scheduled for early 2025'. I struggle to see how you don't see delays therefore, given we're now looking at 2027 at the earliest most likely, if indeed FID is taken.
@BDC
That's the purpose of the direct quote - so you could see that the words hadn't been twisted.
I'm not sure what the point of the Dragon's Den example is. More than half of those deals subsequently fall through after he shakes hands.
Anyway my original point was that these delays are what are hurting the sp. Because, every extra day things are delayed, Chariot gets weaker. Will Energean be the beneficiary of that? Possibly, in my opinion.
There's only one thing we know for sure: if the share price continues to bleed, we'll inevitably get someone here quoting Warren Buffett and how Mr Market is irrational, all we need is patience etc etc. Although I did notice that he didn't mention Chariot is this weekend's annual shareholder letter?
@BDC
Your post from July 2023: "And of course, the aim of any large farmiee is to try and get as much of the desirable asset off the smaller player as cheaply as possible."
It would seem to me, using your own logic, that if Chariot runs out of cash prior to FID (which I can't see how they won't, unless they manage to do a farm out deal on Loukos) then that would provide an opportunity for Energean to acquire more of this valuable asset for cheap, no?
Re the 'back costs', are you trying to suggest that this deal is what you expected all along? Your posts seem to imply you were expecting $50M+ upfront that would be used to develop Loukos.
@BDC The very point of negotiations is to get more for less. I'm not sure why you think Saintly Energean wouldn't continue to act in the best interest of their shareholders.
I keep hearing about Morocco's desperation for gas asap and the amazing relationship with Chariot. Remember how long the Rissana license award took? How about the 'new gas venture' that was confirmed as the Loukos license? At least 12 months for each as I recall. I bet if I had posted in December that I think this farm-in won't be approved for at least 3 months I would have been shot down as a fear-mongerer. Yet here we are.
As for Energean, the counter argument to those that say that them appointing a country manager signals how serious they are taking Anchois, is that they are putting in a country manager because they want to hedge against the risk of Chariot owning the relationship. For whatever reason - you decide.
Balanced argument is a good thing. I think its disingenuous to preach something (eg back last year when you repeatedly stated that Chariot could expect $50m+ in back costs), and then not to address those previous errors in judgment. Instead you just pivoted to a new positive narrative ("this is an exceptional farm out deal"). Why the reluctance to publicly consider the negatives as well as the positives? Why do you not consider it necessary to challenge false positive statements - eg thebold and myoung who last week were stating "FID is guaranteed" and "they have advised FID will proceed"?
This forum would be healthier as a result of balanced argument. That is all I'm trying to bring. Those with an agenda to pump (perhaps because they are trying to offload, or perhaps because they want to bury their head in the sand) will see this as a threat and therefore try to shoot me down. It is what it is. For the record, I am a significant (for me) shareholder.
@whimax
I'm not sure why you feel the need to insult? So obviously you disagree with Energean being advantaged by Chariot being financially weaker. Do you agree with my point about a delay with AE increasing the likelihood of a fund raise?
Let’s hope Energean are as motivated to move quickly as they say they are.
Objectively if I was Energean I wouldn’t mind running the clock on Chariot to weaken them financially to the point where they would take a revised deal to get to FID (assuming Energean want to proceed).
If AE is delayed (originally stated in H1 2024) then there’s got to be a good chance of another raise incoming later this year. Let’s hope it’s after a successful Loukos drill so it’s at a higher market cap.
@thebold
Remember when you said last week that you were all for sensible discussion and debate around this stock? But as soon as someone says something you don’t like or agree with you resort to baseless accusations, name calling, and distracting rhetoric. There is a relatively new adjective for people like yourself: Trumpian.
@thebold
You know my thoughts on understating the risks. No one knows what the likelihood of FID being taken is. At this point in time I hope >70%, but who knows - the sp wouldn't suggest it's that high! Success at AE would take it much higher obviously.
I wonder if Chariot are delaying committing to the Loukos drills, until Morocco approves the Energean deal, and the $10M is released to us.