Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
Its what the RNS doesnt say that is interesting. "Following a short period of swabbing, WR-38Z is flowing naturally." Firstly, 6.5 weeks is not a short period and secondly, it does not say flowing OIL. A well of this design should take no more than a week to clean up by swabbing (less if coiled tubing were available which it seems it was not). There are a number of possible reasons why it would take so long; (i) there were significant operation problems, but would seem to be inconsistent with "operations at WR-38Z continue to proceed smoothly"; (ii) the well was severely damaged during drilling due to large scale mud losses (at a reasonably swabbing rate of 500-1000bpd this would be a huge quantity of mud to be removed that would warrant comment during the drilling ; or (iii) the well connects very poorly with the reservoir and is not productive, perhaps due to limited open fractures, and the swabbing rate has been insufficient to lift the mud out of the well in a timely fashion. Whatever the real reason, shareholders are not being told and it would now seem wont be until the news of the next well spud is made.
I am not invested but have been following closely on the hope of seeing an investment case.
If CalEnergy had declined their - now expired - option on Harvey, IOG would have to have put out a RNS by now. So it would seem there is at least constructive discussions ongoing. Since fully funded, there's a clear situation here where the fundamental value is significantly in excess of the current share price but, given 1st gas is a long way off, the market is overlooking this. However, what appears most interesting is the wording of the recent LOG administrators statement; "our advice is that the share price is currently at a significant discount to IOG's estimated net asset value". Given strict fiduciary duties, it would be normal for administrators to accept the market price without question. Also significant here is the statement "achieve the best outcome...in a reasonable timeframe" so they're not going to take a long time over it. Their intentions would seem to be pretty clear...
Tight hole means that all those involved in the well are bound by strict confidentiality and any information release is controlled by the operator - which has just happened.
An interesting RNS from CERP. The tertiary target - which would have been drilled weeks ago - is reported to have had HC shows but was either not logged or the log results are not reported (more likely as it is a target zone). The RNS states that it has been cased to allow testing but only on a successful completion of the well. This suggests that it would not in itself justify completing the well for. The secondary target - which would also have been drilled some time ago - is reported as having oil shows but was also not logged or the log results are not reported (more likely as is a target zone). The reference to high pressures seems to relate to well bore instability and perhaps difficulties with the drilling operation. Reference is made to operational learnings. Drilling is reported to now be in the final section, but no reference to depth is provided. Given the well was expected to be a 30-45day well, which would imply TD this week to early next week, one is left wondering why the log results were not reported and/or why this RNS was released?
The key pre-drill risk is whether these sands will flow commercially. The Gas readings show 14.9% gas over 10m of potential pay in the Lobe G, 7.2-8% gas over 39m of potential pay in the Lobe C , and 100% gas over 8m of potential pay in the Anita. 100% gas means that the operator was circulating out 100% gas in the mud corresponding to the depth of the Anita sands. This would imply the gas flowed into the well and is supported by the reported 30% over pressure (it is not reported as such but it reads as though the operator took a "gas kick"). Overall these gas readings over a total of 57m seem sufficiently high to represent possible gas pay but we wont know until the testing confirms this. Barring an operational problem with testing, we can expect the Anita to flow given it has already; the question is at what rate.
So, do these figures for the success case on the current well sound about right to you?
19% of Lobe C prospect equates to net 58bcf mean resource (115 bcf upside). Ref GCA CPR valuation is approx US$1/bcf NPV10 here, giving approx 6p/sh on the mean success and double this on the upside case.
Whether the S/P responds would seem to be in part down to what Lombard and Phoenix do with their options (no lock up?) and shares (lock up to 21/02/2020) respectively, and, as you say, whether the company commences marketing...
Comments welcome
Samra: thanks. So no changes after the 3D being reported to the CPR figures on volume and COS.
Has anyone managed to get a chance of success of the current well from management?