The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
When we dropped on the announcement of the “stellar” results, I started to really question if there’s going to be a positive ending. I felt it was possible the market didn’t like the 500m horizontal results being extrapolated to 3000m. Still, thought we’d be higher. We ran up significantly 8 years ago on the back of lesser results and the impending stop work of the Pepper Inquiry and real risk the development would be stopped. As such, I don’t know why we are here, but it would appear the headwinds of environmental, government regulation and location are having an impact on valuation. The only thing that gives me comfort is the entrance of Brian Sheffield. That is likely a mixed blessing in that if he sees value, he’ll work hard to get it as cheap as possible and unless we have another interested party, likely will.
This is becoming so predictable and incredibly disappointing. I speculated a financing was in the works after the last call where we were told “there’s no need to raise” only to have POQ announce we’re reducing our participation in a “masterstroke” move to sit out having to dilute our investment. Today we find out a financing is indeed being done at near our 5 year average low and giving up an additional ORI for a very small raise!! So disappointing that we can’t believe anything POQ says directly to shareholders. Looks like he just wants to ensure there’s enough cash to continue to collect his salary for the next few years. I’m in agreement with Longknife and by the time this is sold we’ll be looking at a buyout much lower than hoped for.
Picture me shaking my head slowly. FO will participate at 5% on the next 2 wells. WTF? This after just being told we will participate and are fully funded. I’m speechless.
I will also add that a fair price is relative to your cost and time held. I’ve been here for about almost 18 years (FFS) and was expecting the to be at $10+ by now. So I’m not going to be happy regardless but hopeful to get a significant amount of capital back with a small return. Many others could have a much lower cost and shorter hold, and will be happy with a 2-3x of current price. GLTA.
Longknife - for what it’s worth I also agree with you. I can see BS quietly keeping a lid on this and accumulating while it’s being derisked. At such time that he’s sufficiently satisfied that the value is there to proceed he will put an offer forward that will need to be put forward to shareholders. I feel there are sufficient long term holders who will support anything that’s reasonable. We just aren’t negotiating from a position of strength and BS knows that. We need cash to participate in future wells and regardless of the instrument that’s used, it means further dilution. As such, I anticipate an offer within the next 12 months that will result in sale. While I hope to be surprised to the upside, I feel there will be sufficient support for existing holds to get majority approval for a valuation that most of us will be disappointed by.
Longknife - this game is not set up for retail. The institutional money will want a deal and this is the prior 3month average. POQ has done this before. We do need money, the institutional guys will want a deal. They will position it in their clients accounts, wait for confirmation from the next full length horizontal and then start to walk it up. Nothing else makes sense. This has not been an easy hold. GLTA.
The only explanation that makes sense here is that there will be a financing announcement soon and priced in this range. Seen this before.
Smallfish9 - you clearly demonstrate a deep understanding of the play and valuation. Assuming the next 2 wells repeat the results recently announced, what do you think FO would be reasonably valued at?
If history is any indicator, POQ is already working on the next raise now. $5M cash and balance of carry doesn’t provide enough financial strength to ensure participation in future wells. I’d say he’s looking to raise another $15-20m on the back of these results and the pending 2 wells in 2024. He can’t afford to run out of cash before the completion of the next 2. The institutions know this and are likely keeping a lid on this. Frustrating but it is what it is. Let’s just get on with it and get to the sale.
I joined the call about 5 minutes late. I didn’t experience any technical issues. POQ had very prepared answers to every question. I’ve been here too long. Not surprised by any of the answers. I’m disappointed we’ve been here so long (14+ yrs for me)….and are still being told hang in there for another 2-3 years. I acknowledge some of the delays have been completely out of the control of the company. It’s just really hard to put a reasonable future valuation on this with all the confounding variables. If POQ would have thrown us a bone to offer a floor value/back of napkin future share price, it would be easier to know if it’s worth hanging on another few years. My concern is a capital raise is inevitable, if not already in the works. When I first purchased (under Bruners promotion) this was going to $30USD. After the farm down, I was thinking $3-5 was reasonable. Now 14 years later I’m not sure if $1USD is a guarantee and we’re still being told that the valuation is building. I just don’t have any idea anymore what a reasonable valuation would be. Would just be nice to have been provided some guidance on market cap if they meet minimum expectations with no major setbacks.
First off Happy New Year to everyone! It’s entirely possible that the Xmas break is the reason for lack of activity at the well site. Considering the remoteness and weather, we may be experiencing a delay due to crew being away for a break and just getting back to site and setting up for next stage. It’s easy to think the worst with everything we’ve experienced over the past decade + but I honestly feel this time will be different with the long game being set up by BS and friends. Results will be here soon enough. Here’s to a great 2024!
Newt - now you see why I posed the question a few days ago. Makes no sense.
Thx Harford. Trying to cross triangulate between valuations for FO and TBN. Either TBN too low or FO too high.
Thanks for sharing. Exciting times if this well finally delivers what we all hope for. Unfortunately been here before, with the same expectation of positive results and have been disappointed. So trying to not get too excited! Hopefully we get surprised to the upside this time. Been here since 2006 (17 years FML!) so need a big bump to justify the capital invested over this time period. Based on this information I’ve attempted to calculate a valuation for FO. Anyone else attempt this? My numbers just don’t make sense based upon us having a 22% of this play.
Agreed Origin has not been the best partner. It also appears as though previously communicated drilling commitments will be adhered to. And the asset hasn’t changed. The big question is our future ability to monetize. Mr. Sheffield should not be viewed as our White Knight. He’s got a plan to secure a major position in this area and will secure it on terms most favourable to him. Unless POQ pulls a rabbit out of his hat, Mr. Sheffield will take control of our acreage at penny’s on a pound in very short order.
The only scenario that would be acceptable to me is for POQ to call bull**** on Origin and take back 100% of the acreage. I’d be ok with sitting on this for the next few years and doing nothing (kind of like now) while others around us increase the value. Otherwise, we will continue to see our share of the asset shrink as we trade it for drilling commitment.
The only thing I’ve learned holding this investment for 14+ years is that if POQ’s lips are moving, he’s lying. Next year is going to be our year has been his talk track for far too long. While some here choose to have blind faith and feel this is good news, I do not. There is clearly no line up of deep pocketed majors seeking a position in this area. The $60M is a joke and is the only data point we need to focus on to understand the market value of this acreage. Tamboran completed their financing below their IPO value and at a 29% discount to market price. While we have yet to see the full details and longer term impact on FO, we should all come to the realization our CEO and puppet board will not be transparent with us. This news is a shocking disappointment.
Scinceday1 - a royalty is an ongoing revenue stream from a producing asset. While I don’t believe the details have been shared beyond the %, consider it a long term share of future revenue/profits. The purchaser of the asset will have to give up 3% per year. This could be a lot of $ should this ever get to production. Thus the importance of eliminating these royalty’s along the way. The call option was provided to FO from the original option holder to buyout the royalty for roughly $6M. Looks like Sheffield provided the cash to do this.
Let’s be mindful that while the pricing of the placement is above market price, it includes a 2% royalty. I’d have been ok with the PP if it would have eliminated all the Royalties. Disappointing to see the original interest was reduced to 1% rather than eliminated. We therefore still have a 3% royalty that will hang over the final valuation. Again, I’m disappointed with how POQ can state we don’t need to raise any cash….and then goes on to do another financing. I’ve given up on anything he says as being truthful.
I still feel the selling is an attempt to ice the share price to allow others to accumulate. Like we’ve seen for years. When the volume is high, it’s harder to do. It’s disappointing to see our work plan for the year is 2 horizontals off an existing pad, with results not anticipated until 2023. With the opportunity at hand, with support of government and a high price for LNG, I’d expect a much higher level of urgency to get a commercialization declaration. Market unfortunately says dead money for another year. It’s also a bit concerning that all horizontal wells drilled have encountered “issues”. I, like many was hoping we were in the final year of ownership with a buyout in sight. With talk of another 12-18 months for more data, this is pushed out again.