Member Info for rossannan

LLL “CERP hasn't drilled a well for several years” Don’t forget the two Mayaro wells that NR got away with last year before LK called time on his nonsense. Fair play to LK - he grasped immediately that the Mayaro campaign wasn’t viable. LK’s alternative Goudron strategy hasn’t had the traction that he hoped but at least he called time on the potentially ruinous Mayaro campaign.

Garnhiem.

“Funding drilling the old fashioned way! Self generated cash flow.”

No-one is buying that. Literally.

I seriously hope that HH has an attitude to Horse Hill not dissimilar to Cashman007’s and, once everything has gone through, has the sense to cash in our UKOG on the next spike (even if it is a relatively modest one). The size of our holding will allow him to do this below the radar, which is ideal in the case of a share like UKOG.

IreneKrapp

That 10% SWP CoS was well spotted. You must be due a bonus from our MM paymasters for that...

TCGLOVER

As if anything on this BB makes a blind bit of difference to the share price. But let’s talk about production. Any guesses where that is going this quarter?

April oil production: average of 574 BOPD
May oil production: average of 532 BOPD
June oil production: average of 553 BOPD
July oil production: average of ? BOPD
August oil production: average of ? BOPD
September oil production: average of ? BOPD

Of course, once Steeldrum has completed CERP will benefit from, among other things, the “low pressure, ‘exhausted’, reservoirs in the mature Inniss-Trinity oil field” (see PRD RNS of 31/07/18)...

Just wait and see. Our UKOG will be turned into cash soon enough and we won’t look back.

wraith

You talk about LIND as if they aspire to be equity investors in CERP. They do not - they make money by avoiding equity-type risks. Look at the amount of CERP equity that has been issued to LIND over time and then check the TR-1s. Nothing from LIND. They see CERP shares (like any shares) not so much as golden tickets as hot potatoes. My point is about the potential for further share issuance to LIND at a lot less than 8.1p.

steward1

Cash balance at the end of Q3. More or less than Q2’s $2.4 million? A lot less, I would suggest. Tell me why you think otherwise.

mossma

Last quarter the company reported an end of quarter cash balance of $2.4 million, a decline of $1.7 million since the end of the previous quarter.

wraith

The thing about the LIND facility is that despite that eye catching figure of 8.1p we have the usual “or monthly repayments may alternatively be made in equity at the Company's election at the prevailing price at the time of payment” provision. In other words, if cash gets tight the LIND facility will be paid off in shares.

HH

LK cannot bank on Predator coming through though.

steward1

“Ross would rather that it was stuffed under LK's bed.”

Not what I am saying. LK does not have much choice but to spend the money, my concern is the rate at which it is running out.

Garnhiem.

Gross profit but a net loss. Time will tell whether or not Steeldrum was a good deal for CERP. In time LK will no doubt make the best of it but in the meantime the cash is, as I may have mentioned, running out.

Horseyhead

It is hard to know whether a more substantial debt facility like that is the answer. Would it be counterproductive if LK took on more debt than he needs to? What would the market make of such a substantial debt facility? LK is clearly more careful about how money is spent than his predecessor ever was, but would such a substantial facility tempt LK to spend less wisely?

My argument is that LK needs to take a more realistic look both at the rate at which CERP is running out of money and at the time lag before various things will or may start to pay off for him and then accept that he will probably be well into the LIND facility, maybe even at the limit of the LIND facility, before enough green shoots start to appear.

Why take CERP that close to the edge? He needs to do something. The wee one for five that I have suggested would give him room for manoeuvre without anyone having to be diluted if they didn’t want to be. Being a one for five (or whatever) would make it a raise that respected the pre-emption rights that shareholders have relating to the issue of shares for cash and that could therefore be done even though Resolution 5 was not passed (Who was it that told LK what he could do with it? Schroders? Seems likely.).

A wee one for five (or whatever) would allow all shareholders to preserve their percentage shareholding (provided they had sufficient funds available to take up their entitlement) and any excess from shares not taken up would no doubt be snapped up by the keenest holders. In other words, it would be tickety-boo.

Garnhiem.

I will try and talk about “running out of money” rather than “cash burn” in future.

What obsession with placements? As we have discussed on here, placements are not even possible since Schroders (I am guessing, but the figures do strongly suggest it was them) rejected Resolution 5.

Garnhiem.

I wasn’t suggesting that the money was being wasted, merely that that these investments are not paying off quickly enough to address the cash burn. Hence my suggestion of a wee one for five to provide a proper breathing space. You would presumably bite LK’s hand off and snag any available excess, so what’s not to like?

limopeter

I said before that as things are I would be a buyer sub-3p. I don’t see any reason why it should fall that far, but I have a price alert set just in case it does.

johnjunior

I am sure that there will come a time when LK starts to get really significant traction - the previous BoD were rank amateurs compared to him and his team - but it does not seem to be happening yet and my conclusion is that it will not happen in this quarter, which will be a bit awkward unless he does pull some kind of rabbit out of some kind of hat (but I prefer not to invest on a premise like that).

Garnhiem.

Goudron seems to be the key change in the road map. As you know the original plan was very much about Goudron at least washing its face and thereby conserving the cash pile derived from Schroders for the initial foray into the SWP. Goudron does not appear to be washing its face though - it still appears to be money pit. LK may master it in time, but how much time does he have before money gets too tight? Not long, I suspect, hence the LIND facility, however he chooses to explain it. I am not seeing any acceleration of the SWP development timescale as indicated on the road map. H1 2019 will only see one SWP well according to LK, that hasn’t changed.

You talk about the significance of where money has been invested. I ask you when those investments are going to start paying off. The figures speak for themselves:

EOY 2017 - approx. $5.4 million cash
End Q1 - approx. $4.1 million cash
End Q2 - approx. $2.4 million cash
End Q3 - ?

April oil production: average of 574 BOPD
May oil production: average of 532 BOPD
June oil production: average of 553 BOPD
July oil production: average of ? BOPD
August oil production: average of ? BOPD
September oil production: average of ? BOPD

What are the investments that are suddenly going to start paying off in Q3 so as to put those figures on a different trajectory?

I watched two of the medias, the brr one and the one from the O&G event. I will get round to the others eventually, but presumably they do not add much to the two that I have watched.

Your question was about why I post on here. As I said recently, I have answered that question so often that there is no point in me answering it again. You either take my previous answers at face value or you don’t. I am here to talk about CERP.

Garnhiem.

Presumably you would accept that the last 3 quarters have seen CERP’s cash pile go from $5.4 million to $4.1 million to $2.4 million.

Garnhiem.

I am trying to figure out the trajectory based on the historical data rather than the possibilities outlined by LK, bearing in mind the fate of the original road map. Would you be happy to see CERP down to $1 million in the bank at the end of Q3 or do you think that something will emerge in Q3 that will stop the cash burn in its tracks? If you do, what is it?

Garnhiem.

It’s not about an entry price. CERP does not look anything like as attractive to me as it did three months ago, as you can see from my posts back then compared to my posts now, but even if it still looked attractive I am not kidding myself that anything posted on this BB has any significant traction on the share price. It’s about trying to spot what is really going on and predict where the share price is going, at least in the short term (I predicted sub-4p and was correct). Medium/long term is a lot harder.

The problem is that CERP is in an incredibly CAPEX-intensive business and, while LK still has a lot going for him, he cannot conjure capital out of thin air.

LK did have a credible plan that he offered in good faith, the initial phase of which was based on Gourdon doing enough to at least conserve (if not add to) CERP’s Schroders-derived cash pile, allowing him to do accretive (though “accretive” is a hugely misunderstood word) deals and make CERP’s initial foray into the SWP from a position of financial strength.

Despite LK’s original due diligence and many months in situ before he even produced the now discredited high case/low case production graph, the initial phase of his plan has now stalled. The RNS not that long ago that talked about “cash burn” was one of a series of red flags that led up to the revelation that the last 3 quarters have seen CERP’s cash pile go from $5.4 million to $4.1 million to $2.4 million. That put the tin lid on it for me. It is now clear that LK has not mastered Gourdon - Goudron has mastered him. Steeldrum may turn out to be LK’s way of telling us just how little to expect from Goudron WF.

The last nine months have seen WTI climb from the late $50s and settle in the mid $60s, yet in 2018 at least half of CERP’s cash pile has gone. Steeldrum’s cash and debt may or may not feature in the Q3 figures, but if they don’t, what will be left in the bank at the end of Q3? $1 million? This is why I would argue that it was disingenuous for LK to describe the LIND facility as a form of insurance policy.

mossma It is really no time at all.

Vmax If the money runs out before you reap the rewards of your spending, you are not in a strong position to secure the funds needed to finish the job. That scenario is almost always bad news for shareholders. This isn’t about the sunk costs fallacy coming into play like it did under NR - LK is clearly more careful with his spending than that - but I would suggest that the market can see how close to the wind he is sailing. What is wrong with my suggestion of a wee one for five?

Garnhiem. In theory. In practice I would suggest that none of these, which all have their associated costs, will kick in quickly enough or with sufficient impact to gain enough traction on CERP’s deteriorating cash position, at least not until they are well into the LIND facility, and even then I do not see CERP having enough headroom to self-fund the initial foray into the SWP unless that is kicked into H2. I think LK has been disingenuous in his characterisation of the LIND facility as an insurance policy and that he would be better coming clean about funding and doing a wee one for five. I think that would turn this on a sixpence. The current plan is likely to be more like turning an oil tanker. Having listened to LK recently, I would suggest that he is the one currently doing the speculating.