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This is standard on AIM Oil and gas exploration shares - speculators look to try and get in on a pre-drill run-up and then take gains before the drill result is announced. I'm not sure why anybody was expecting different.
I wouldn't necessarily expect strength or weakness from now on in - just volatility.
Its in the half year report
"As of 30 June 2022, the Company had cash balances of US$1.1m. A loan in principal has been agreed with Bank Center Credit in Kazakhstan, there are sufficient projected funds from this and from current trading to meet the Company’s medium term plans. This includes the repayment of the US$10m bonds that are due for repayment in December 2022"
Is it Kazakh Government backed funding - I don't recall that?
They need to close the funding - thats all that matters now. They have the bonds expiring at the end of this year and are relying on the funding to repay those bonds.
Unsurprisingly there is a complete lack of trust at the moment, hence the SP being where it is.
"They detail those commodity price falls and attribute it 'primarily' as the cause. Gas (@ c52% of volume) is 8.8% down; if all prices were down by that amount then why is the NOI now down by a further 14%?"
NOI is net margin - if gross prices are down by 8.8%, the net margin will be down further by a factor of what the net to gross is. If my gross selling price is $100 and my net margin is $50, then a 10% drop in my gross price results in a 20% decrease in my net margin.
Next year there is likely to be substantially more demand for LNG than this year. A substantial amount of the filling of European storage this year came from Russian gas, prior to the shut down in early September, where as next year it has to be assumed almost zero will come from Russia - thats a huge amount of supply to be replaced. Additionally China was releasing gas from its strategic stores and export it as LNG, so 2023 will likely also see China import substantially more.
The main question will be whether AECO bottlenecks can be reduced to get the actual gas out of Alberta.
Maari would have provided a net cash injection, likely covering the cost of initial investment- it was a deal done when oil was in the dumps so the terms were exceptional, there is unlikely to be anything available on similar terms at the moment.
They've shovelled all free cashflow out for "advance payments" to contractors so have hardly any cash on the balance sheet - they have bonds expiring in 3 months time, which they are supposed to be refinancing with an expanded bank facility, but given the reduction in gold price in recent months, I can imagine its still being reviewed.
The money can’t be claimed back, it’s an offset against the various supplementary charges for UK oil and gas - I’m not even sure it’s any benefit to EOG as the supplementary charges are offshore only I believe.
I’m not sure why you think EOG could enter the market and repurchase 390million shares at the current price. They’d have to tender it, they would be fees involved and it would spike the price.
Not that they would anyway - why would management risk their gravy train?
Of course a substantial discovery would have been positive, but this has cost very little and now I3E can go back to being a Canadian cash producer with some great assets with the cost and politics of an expensive North Sea development sat over it. I’m sure it won’t be pretty today but I think it will quickly recover
I'm amused Edgein has used the Centrica example - a transaction from 2012, when the North Sea was pretty hot, between two giants (Centrica and Total) for assets that were already producing 9,000boepd.
As if that is any sort of benchmark - producing assets, can't be compared to pre development assets as you say.
Anyway, lets get the result first and then worry about valuation - its just further de-risking along the way.
“watch planet of the humans documentary - all renewables have a bigger carbon footprint than fossil fuels“
The film was factually and scientifically illiterate on this point. There are enough studies and evidence showing renewables have a substantially lower (as in 75%+) lifecycle carbon footprint than fossil fuels.
Planet of the Humans was to renewables what Gasland was to fracking.
"All of this would have been different if we had invested heavily in oil and gas whilst the others were not, we would have security, storage and probably even be a net exporter whilst the prices are high"
Who is we? Tax allowances for drilling in the UKCS are relatively generous, more so now, and tax rates are globally mid range. The UK Continental shelf is a mature high cost basin in long term decline that could only be slightly slowed and not stopped - its simply not an attractive destination for majors as there are limited large fields to exploit and periods of low oil and gas prices have dampened investment. There was never any chance of being a net exporter again and environmentalism is a long way down the list for why UKCS doesn't get investment, nor why production declines won't be prevented.
There could have been more storage, but its still a European gas wholesale market, not a UK market only so storage needs to be looked in the context of total European storage not UK storage - its also something of a hindsight view, storage would be more akin to being insured against a lightning strike then insured against a burglary but unfortunately lightning has struck.
I’d not call the Government complacent - incompetent would be a much better description.
For the first time since 2001 I’d vote Labour - fortunately I don’t live in the UK so don’t have to.
“See my previous post which says - custodial risk applies to any stocks held in online accounts“
Don’t be ridiculous - cash can be at risk due to co-mingling and creditor priority but shares are ring fenced and protected in a bankruptcy
So basically they are still shovelling excess cash out as pre-payments.
Herbert - this well I believe has been designed as a trade off between finding an optimal spot to prove up a good level of resources but ensuring it is a safe spot that even if the sands aren't as thick as expected it doesn't miss - I'm sure the Liberator well is still fresh in mind. This well will start to give them the information to develop a field plan with production wells, but no point trying to keep this well, if they wanted to suspend it, it requires a whole extra levels of approvals and monitoring,
I'd expect any future appraisal well would be done with it also being planned as a production well, but given this could be a joint development with Tain, its not clear to me if they would need another appraisal well, they may be able to go straight to a production well as a next step and then future steps are appraisal wells for infill drilling - but I'm speculating here, maybe others could comment further.
Tony.
1. On undeveloped North Sea Reserves - how long is a piece of string, it clearly depends on a whole range of factors. Orcadian Energy as one benchmark sits with 79million of undeveloped 2P plus a host of 2C and sits at a market cap of £22million, so around $0.33 per barrel, if you assign all value to the 2P - as a counter point that is heavy oil and clearly requires a substantial standalone development for a company with no cash, hence the substantial discount. Overall if success at Serenity brings I3E an additional $1 per recoverable, I'll be pleased, $2 delighted which is 6-12p on the share price but I really can't see that upper end.
2. Agree EOG is not overall a very good benchmark due to the volatility and effectively all or nothing drill, but the risk off from EOG today is very typical of drills as traders who have tried to take a pre-spud rise take any risk off the table. I suspect EOG might have some more gamblers coming into it pre result so it might climb, I don't expect much movement in I3E.
3. I'd say my scenario is possible rather than likely - I think one of the reasons I3E trades at a discount to peers is that split between Canadian production and North Sea development - I think spinning off North Sea while retaining an interest could drive a re-rate of I3E's Canadian assets which you have shown sit at the lower end of the valuation.
4. Totally agree Synergy is an exciting well as it is low risk and offers a very quick route to development with partners with deep pockets and I3E also having cashflow to develop if they choose, its very compelling. The market however clearly doesn't recognise that now and I don't think it will after this drill - I think any tie up between Tain and Serenity and a clear timeline for first oil this can start to get interesting - hopefully I'm wrong, it has been known!
“ If we're still in the mid 20's nearer Serenity result then yes I'll be annoyed, but ultimately we're going to be valued in 5 weeks on what they discover (or not). I'm expecting low 30's in 4 weeks and intend to hold everything until the announcement”
I don’t see this going up substantially through the drill - those days seem to be gone, people try and get in for a pre drill spike but get out quickly as the drill starts so they aren’t exposed to risk. As we’ve seen with EOG today.
I don’t even expect a successful Serenity result to have a substantial impact in the short term - sure, they’ll be a spike but I’d wager good money, most on this board are disappointed at the SP a fortnight after. Undeveloped North Sea assets still don’t get valued at much nowadays especially as part of a group with substantial other assets.
Subject to success at serenity, I think it is quite possible the company will be split - Serenity and other North Sea IPO’d to raise cash for next stages of development with I3E keeping a stake, I expect you’ll get a better valuation than a sum of the parts, as I3E becomes solely Canada and cashflow for focussed and the NewCo focused on North Sea and Serenity investment. Holders of I3E don’t have the concern about cash being diverted to an expensive North Sea development and so it becomes even more of a low risk cash cow, while NewCo attracts some more speculative money.
Other alternative is that Serenity gets farmed down in a (likely in a development with Tain) for free carry to production.
Let’s see - hope first for Serenity success.