The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Good Post.
Quite a reassuring interview. I guess the delay in HRZ farmout now means that a horizontal won't be drilled till summer 2020.
Looks like there will potentially be quite a few wells/results to look forward to in 2020! Real value creation!
Anyone with experience knows what a typical timeline for negotiations is?
I'd think the bid that was submitted outlines a gross contract and now the minor details are negotiated. Hopefully weeks and not months!
Chartman99 - you may be right and i hope you are but if we flip your thinking to the farm out partner - Can you expect a tier 1 company to agree on a farmout deal for 70% on repsol/armstrong terms of $3 a barrel i.e. circa $4.5bn?
Very unlikely! I think farmout will give us a good addition to our market cap but within reason - Cantor Fitzgerald gives us a target of 2.7p (approx £120m on top of current value). This is prob a reasonable estimate based on a FO worth around $300m.
Anyway....just ramblings based on unknown variables but i have to qualify my investment decisions somehow!
I know we don't have a huge amount of information regarding what a potential farmout looks like but i'm thinking it might look like this:
4 drills @ $30m each for drill plus flow testing = $120m
Cash to 88e $20m
3d seismic fund across rest of acreage $100m
Total is $240m
We give away 70% of 2.2bn conventional potential = 1.54bn for essentially $0.2 a barrel.
Seems ultra low value considering everyone talks about $5 a barrel in the ground however we have to consider that this 2.2bn calculation is not proven reserve so can we really expect anything higher?
$240m CAPEX for a major is not a considerable amount considering the potential upside but I guess if there are numerous parties bidding, the terms may be more favourable to us.
Another consideration is that the unconventional dataroom has been open for a while as well, so combined farmout offer may be on the cards and may result in delay beyond the Q1 self imposed deadline.
Hope DW gives us the update soon than later.....the suspense is quite literally making my head hurt
Thought it might be worth having a realistic discussion regarding the future of Winx.
Optimistic/Encouraging news so far but let's say that wireline logs and flow test of one primary target goes ahead this season. This leaves other targets yet to be flow tested - likely next year.
Furthermore, is one drill going to give us an estimate of true reserves? - prob not. We will need 3+ drills in other corners of this acreage to determine a real value for what the consortium has under the land. How will we fund our share of this? WIll it be another Farm out / capital raise / Leverage payments from SOA rebates and Convention FO
Either way, I think it is a great start but attributing a final value of $3-5 for 144m barrels+ is at least a couple years off.
Any discussion is welcome!
Looking at the schedule we are a couple days behind in drilling the primary interval (Day 10 rather than Day 8). I would expect the next update around the middle of next week but I hope we are pleasantly surprised earlier!
Thanks, I saw that but reading the company presentation, it was not clear to me if the 400m estimate included the secondary targets. Minor point i guess
http://clients3.weblink.com.au/pdf/88E/02070754.pdf
My understanding is that the 400 MMBO is the best estimate for the Nanushuk topset play only. The other targets as highlighted in the Winx presentation are Seabee and Torok stacked targets.
Therefore the upside of this drill is potentially quite large i.e. >400 MMBO. Might take a while to interpret quantities of oil after drilling/flow testing so the true market response to this drill will likely be in the next few months and not weeks.
Best sit back, relax and not worry about share price (unless you are a trader!). I'm pretty excited with this play! This company will be completely different in Q3/Q4 of this year (for better or worse!)
Other scenarios definately possible I guess.
Everyone a little frustrated I guess after what was thought to be a positive run on the SP. Either way I’m sure that by the years end most of us will have smiles on our faces (hopefully!)
I guess there is a trading halt as the shortfall shares have not been bought yet and are still being bid on (23 hours left). I guess this prevents open market investors getting further annoyed if they are to buy in today/tomorrow at a 25 percent premium when the BOD are aware that we will likely drop back to the placing price in the short term.
Strategically it makes sense:
1.release operational update showing potential
2.paid advertising to publicise
3. Raise capital via shortfall shares - now advertised well and at 25% discount
4. Funding sorted for Winx flow tests independent of farmout
5. All potential share price dampeners our the way leading to constant gains with positive news from now on
That’s my interpretation anyway!
https://www.freshequities.com/c/ASX-88E/c43be662-e2e4-11e8-a61d-0242ac110007/88-energy-limited-launches-$10m-capital-raise
Looks like it is unfortunatley
Happy Hatter
Good summary list of the next 9 months. Other news to come include:
1) Revision of Yukon estimates based on inversion 3d Q12019
2) 3D acquisiition and interpretation across central and east acreage depending on farmout.
These both will be smaller drivers of SP but will keep the buzz up in 2019 ahead of drilling season Q12020.
There is no detail regarding this in the Operational updates that i can remeber going back last couple years but do you we expect to find any natural gas across the acreage?
MM - interesting thought however i'm not sure that 90million barrels of prospect has the kind of value we hope it has at this point in time.
As per presentation timeline we are planning to drill a well in Q12020 and on the back of a succesful flow test i think we would then be in a good position to deal. Just need the capital for that well!
The terms of a HRZ FO are going to have many other factors that dictate the deal terms and as the pool of potential clients is much less a staged deal is likely going to be the most important feature.
On a positive note this is a great start to the 9 month transformation period and i look forward to the upcoming expected and possibly unexpected news that the BOD will release.
Great news and looks like the markets down under reacted well. I was wrong as i thought announcements regarding Yukon would not have a huge impact on the SP so i'm glad i am wrong!
Hopefully we will have a good run now till FO news is annnounced. The deal might just give us the capital needed to drill a yukon well.