Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I argued last year they were getting ahead of themselves with the dividend - even at higher oil and gas prices, with the development drilling they were doing this was not throwing off a huge amount of cash and the dividend looked aggressive while they did not build up much in the way of reserves.
I highlighted the last thing they should do is get ahead of themselves as it would be reputationally damaging if they had to cut the dividend. The market never trusted the dividend in the first place
And here we are.
I doubt there is an audit issue, the negative working capital at end of last year most likely came from the fact that development investment was backloaded and so at end of year the invoices for the Q4 drilling were still due.
Capital investment in 2023 is also backloaded and it is entirely discretional so its unlikely the auditors would have a going concern issue over that.
"Oil price will be on the rise soon enough"
Thats a brave call - the economic outlook is very uncertain and OPEC+ couldn't agree on reductions, hence Saudi going into alone with a temporary cut that didn't lead to a big more in oil prices.
For a management team that is so highly regarded and with their track record this is utterly appalling. Zero indications or communication over recent months that the cash situation was getting so tight and why the hell are they proceeding with PenMal drilling or any other non-required spend beyond Akatara development, or looking at further M&A opportunities if they have to go into the market with a begging bowl with such a terrible deal.
Sinphuhorm which about 3 months ago cost$27.8million is now an utterly terrible deal for existing shareholders as that has cost the cash buffer that has resulted in this placing being required at a terrible share price on terrible terms for the underwriting.
After boasting for the last two years about benefitting from being unhedged, while oil prices blew above $100 and not taking any opportunity to lock any of those high prices in they've now been forced to hedge at or around 12 month low oil prices for 50% production for the next 2 years - and the hedged price also looks on the low side, as Jadestone production generally trades at a premium.
All in all terrible risk and liquidity management that removes a significant amount of future value from present shareholders.
“ Planned / forecasted, but not announced, acquisitions?”
They shouldn’t really make forward looking statements that include unannounced acquisitions.
Plus it would also be bad expectation management if it was forecast but not committed acquisition.
“I'm not sure i agree on point 2. The cake is simply getting bigger hence, it is diversification. I'm on the call now and Blakley just said 7500 BOPD with a 6000 average, not 5k.“
The 20% comment relates to mid-2024. My calculations suggest production of around 25kboepd by mid 24, so Montara would be 5000 for 20%. At 6000bopd from Montara this would suggest total production at 30kboepd which would be great but I’ve not seen any credible forecasts it could be this high - happy to be proved wrong though.
Not too surprised by the market reaction as there were two pieces of information there that were slightly surprising.
1. The fact that Jadestone will enter a net debt position in 2024 - I think even despite the acquisition and the development spend it was expected existing cash resources and cashflow would be sufficient.
2. Montara will be 20% of production in 2024 - this suggests that Montara production will be down to around 5000bopd by then. I’m not sure trying to sell this as diversification was wise.
Generally I’m not concerned and I’ll be rather a buyer not a seller - here for the long term, the planned increase of gas production is smart, the strategy is right and the management team is excellent.
However I won’t be buying yet as sentiment is weak both for the company and wider sector given the risk of recession.
I've about to respond sensibly to this post and then I saw it was Emerald Carrots who posted it - ultimate ramping merchant, just posting any old tosh across boards.
When was the last time Shell bought out a small cap oil and gas explorer? Its simply not part of their playbook, they can farm in project by project and carry all the cards.
"Could new licence wins prompt shell to act? I think news of licence wins will push the sp more than today's RNS has."
Licences will do nothing - Deltic already has tons of licences, virgin licences don't get valued at anything by the market.
"I got to buy loads in th 0.70's. loads and loads ha and ha. ;-)"
0% of 0.70 is the same as 0% of 1.00, 10,00 or even 100.00
Its not a 50/50 bet though is it? Its a 99/1 bet with the odds against you.
"so any shareholder in future can safely assume that entering the chp 11 process is for the purpose of wiping out the share holder. no other reason for it ."
Its to prevent the collapse of the business into liquidation to allow time to negotiate with creditors - without chapter 11, shareholders would just have been wiped out a lot earlier.
If any company enters chapter 11 or is talking about entering chapter 11, its safe to say thats it for shareholders and get out quickly.
"rehpyc - Anything handled by the Americans is illegal. I mean, in what land can you declare bankruptcy, wipe out shareholders, and continue trading? That's right, only in America."
Plenty of countries allow restructuring to continue trading and shareholders will inevitably be wiped out as they are bottom of the capital stack. Chapter 11 is probably the most efficient way of doing it to protect the business throughout the process.
I'm not quite sure why they needed to issue these bonds. Given the interest rates on the development loans from the banks. I'd assume they are for specific purpose and mostly paid out for secured purchases and not for general working capital use, however the business should otherwise anyway be generating enough cash for general working capital. They only invested around $2.3million in Q1, so not much is happening yet anyway.
Still good to see gold up above $2000 and the SP up.
25 years was just an estimate I used for the production profile of Pensacola - I don’t believe it’s been published and that may be a but long, but given first gas would be earliest 4 years from now I doubt it will be far off.
"Timnttm, check the figures. I calculate at UK spot gas price of 109p/therm, the SP value for Pensicola is more or less 12p. Considerably more if the therm price reaches 150p.
These are projections which the market seems to have completely missed, even though an investment has been almost completely de-risked. The SP should be at least 8p"
Fair dealer, the market has missed these they are simply applying risk discounts to them. You might disagree with the size of the risk discount applied, but no one is pay 8p for something now, that they only get back over 25 years and with multiple hurdles to get through along the way.
Getting Pensacola through to production and maintain the current stake, will require 10s of millions which Deltic do not have - its not unreasonable to assume the share count will at least double before production is underway, therefore you can already cut those price per share values in half.