Devex on ii25 May 2018 10:20
This is excellent news in my view, and as a LTH arguably the best RNS for quite a while. Lots of reasons:
- T39 clearly going to schedule � so all 3 oil wells drilled, two well advanced re testing and production, and no serious hiccups thus far
- The authorities have delivered the licence on Niko � as expected � but no issues
- The deal. Assume Niko delivers in line with the economic model � so $30 million over 10 years. So we get the upfront funding totally free of charge, and no shareholder risk. After payback we (FRR) get $18.9 million and the investor gets $8.1 million. The investor � over the 10 years � makes a good return but has of course has provided the capital and taken the risk. But on one well only
- For the Investor to have done this they will a) have confidence in the outlook and b) have accepted that any political risks are manageable
- With the rig scheduled for November (I assume scheduling an extension to the current programme was not possible) I guarantee Zaza will be seeking ways to extend the drill programme beyond Niko. He might need more funding - but he has demonstrated it can be non-dilutive, and importantly that he doesn't have to sacrifice whole of field returns to fund early wells.
- So if FRR do go it alone on Tarabani for the time being � and I would be fine if they did � this type of deal allows FRR to build its own revenue stream without giving away the family jewels
- This all illustrates the benefit of ZM/SN being holders of 2.8 billion shares. They will minimise the dilutive impacts where-ever possible
- Also shows that ZM now has access to other forms of funding. Next agenda item is YA � be interested to see how he deals with that one
- He reiterates that the 3 well programme is fully funded, and a strong revenue stream emerging
- And no mention of the gas - I am getting increasingly confident here. Call it a feeling
After the last meeting a number of us said that the next 6-8 weeks would be transformational for FRR. I stick with that view � step by step he really is delivering a whole series of new building blocks.
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