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GBP have 85% of PEL029, ie, Gemsbok. How much will 600km2 of 3D cost? $1.5mn? How much is a drillship to operate at 1500m above seabed and drill through 1500m of soil? $30mn? How much is 85% of 1bn bbls of oil in the ground worth once discovered? Say at just $1 bbl, then that's $850mn. What's the chance of success? Say 30% given it's structural and there are oils seeps from the flanks. So risked, Gemsbok is worth $250mn (if it's 1bn bbls) today. Management would be mad to farm down to 20% just to get 3D and carried for one drill. But we'll see.
I think the two majority shareholders won't be sitting back now. They've just waited to play the commodity cycle and it looks like they've done it well. They won't have waited this long just to sell/farmout too cheap - they could hang on to much more than 20% and get carried through a drill.
This isn't specifically about Global petroleum, but some of the best investment opportunities that I've missed are because I held a jaundiced view of the management for too long and the management had started to change/do better and I hadn't noticed. Regarding Global Petroleum, I know that the CEO is paid too much for a small company and they've been sat on their bottoms during the oil price crash, but a few things have happened here that now look better: #1: management have negotiated a pretty decent extension to this licence (but with close enough deadlines that something gets done in reasonable time - well done MME) #2: management have organised this infill 2D seismic (but we still don't know what encouraged them to do it) #3: management have commissioned a CPR #4: management have awarded themselves quite modest options (see ECHO for larging it up with options) #5: management have somehow retained 85% of a really prospective block whilst peeing off so many smaller and larger investors that I've been able to load up with 1% of the company at less than cash :-) Believe me, this is heading in the right direction and sometimes you just have to live with less than perfect management because lots of other factors are coming into play as well (recovering oil price; interest in offshore Namibia; nearby drilling soon; etc) And don't forget the pretty positive RNSs and those oil seeps from the structural flanks --- Gemsbok is brimming with oil, imho.
Gas would sort of be nice but Kudu will supply plenty for the limited demand of Namibia. So if gemsbok were gas, I think it would remain stranded. It's oil that we're after. A small gas cap would be fine to power FPSO etc, but too much gas may be a problem. The RNSs and the oil seeps make think that we're definitely looking at oil here.
When I read GBP RNSs, I get the distinct impression that GBP mgt really think they're onto something very special with Gemsbok. I know that you only know once the well is drilled and properly tested, but the noises mgt are making implies that even amongst a fairly cautious bunch, Gemsbok looks special. If the 2D is that good and the CPR is that good, then a farm out won't be such a problem as before. (2D and 3D resolution has improved loads across the last five years and should help give a more accurate CoS.) I know mgt have been slow in the past but they seem to be getting on with it more now as well as trying to get the timing right. The licence extension was a good one as being able to roll Phase 2 into Phase 3 does take away a bit of urgency which could harm during negotiations. Not quite the same as Eco, but plenty of % to farm out with and still leave a juicy holding. Why not have a holding in both and a bit of Chsr do as to enjoy some big targets during this bull market in oil?
600km2 of 3D isn't that much really. They know the prospect pretty well from the 2D and seeps. The 3D confirms the understanding of the 2D and other technicals as well as optimising the drill spot. Looking good :-)
Over at the other place, emptyend (a seasoned O&G investor) made the comment that he wondered why GBP mgt had decided to open their wallets to pay for the new 2D. He suggested that someone might have encouraged GBP to do this 2D on a promise. Rather than opening the data room after the CPR is published, GBP could simply agree a farmout with that interested party if the terms were right. The delay in publishing the CPR *could* be linked with an imminent farmout. GBP may not get the very best deal, but a bird in the hand and all that.... What might also be pushing them all along quite quickly is the rig. GBP mgt may want to get a drill sunk into Gemsbok when a rig is in town as it cuts down the mobilisation costs and so means less of the 85% needs to be farmed out. If I were one of the two majority shareholders, I'd want some speed applied to this now as the window of opportunity for offshore Namibia will only last so long - as does the licence extension. Rigs don't pass by offshore Namibia that often so, ideally, GBP's name will be against one (or two?) of the drill slots when a rig chugs into view. So, yep, there could well be a farmin at the same time or very soon after the CPR is released. Gemsbok is over a lot of water (1500m?) but is only another 1500m or so below the seabed - so it's not a really long drill time either as far as I can tell.
Re-reading the recent RNSs makes me think that GBP management are very hopeful about Gemsbok. Mgt also thought that the CPR would be available by the end of the year (2017). This small delay is making me wonder whether there is some double & triple-checking by Tracs of their CPR report. Wishful thinking, perhaps.
With 15% of the Guyana licence, ECO could be targeting >150 mmbbls recoverable. Exxon have found billions of barrels of oil just 6 kms away...incredible. The best place to find oil is where oil has been found, so ECO/Total?/Tullow's drills look very prospective. If Total sign up, then ECO have the cash to pay for two drills in the Guyana licence. ECO are carried for a drill in Namibia. The Africa Oil money can be use for new licences, shooting 3D, etc. ECO is in a fabulous position. The 100p looks doable.