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Missing paras (again!)...this time without spell/grammar check....

GG, your question whether an M&A bid is good for retail investors is interesting. It will validate that the SP is currently undervalued. Both CEG and Malcy have estimated >25p for Uruguay OFF-1 only. If a highly respected mega org such as Morgan Stanley (possibly on behalf of a 3rd party it’s representing), makes an offer then no one could argue CEG is worth less on the day the bid is made. Not even those on this BB that post constant negativity about CEG’s prospects.

I place CEG’s PIs in four camps: ex-CERP, BPC, CEG 60p (>£150m MCap valuation) NOW, I would let shareholders decide giving the pros and cons. The greatest pro and con being what if Chevron drills and finds oil at is first exploration well…or does not?

GL GG. GLA. DYOR

Starchild

Good day all. It’s been >2 years since I posted anything but keep an eye on this forum (time permitting) as I still hold substantial shares.

Refer to https://www.morganstanley.com/im/en-us/individual-investor/about-us/investment-teams/private-credit-and-equity/energy-partners-team.html ... “Morgan Stanley Energy Partners primarily makes control investments in energy companies located in North America [and sometimes other geographies]. The team focuses on the buyout and build-up of strategically attractive, established energy businesses across the energy value chain….investing in companies with Enterprise Values from $50 million to $1 billion.”

Could Morgan Stanley potentially be in a friendly or hostile CEG takeover mood?

1. I believe it is unlikely Morgan Stanley (MCap >$210 billion) has spent £1.5m in petty cash with the hope it can make a profit (or a free carry) leading to a spud, or wait a few years in case OFF-1 is a success. A pension fund or HNWI may operate this way, but a mega US investment bank where ‘greed is good’ is unlikely to do so.

2. Does it plan to make a friendly or hostile bid for CEG? The latter is more likely to happen if it increases its holdings and makes it public. If the CEG share price soars in the coming weeks it is possibly because MS is increasing holdings or using 3rd parties ready for a dawn raid.

3. Point 2 could also apply if Morgan Stanley acts on behalf of, or partners with, an energy major. It could be Chevron, an Uruguay acreage neigbour, or a major that regretted not bidding (or was outbid) for an Uruguay block. The simple solution is to attempt to buy CEG outright.

4. If Chevron is not ‘in play’ for a takeover, it has committed $15m for 3D, regardless of who is in play. This is not reflected in the current CEG MCap.

Regardless, it could be that MS is acting as a nominee for one of its investment products. If so, why the two TR1s? Hargreaves Lansdown owns >10% of CEG on behalf of clients, but does not issue a TR1 daily because a client traded £1000 CEG shares.

5. CEG’s ‘almost forgotten’ Bahamas acreage is worth substantially more if owned by a major American company such as MS or one of its USA oil major clients. MS has access and leverage at the highest levels of Gov. The first TR-1 was issued almost to the day Donald ‘drill-baby-drill’ Trump was inaugurated. He could bully the Bahamas Gov to fast-track future exploration to serve American interests. (Off-topic: and buy Greenland as a new homeland for Gaza’s Palestinians as long as they don’t get in the way of drilling and mining.) It’s in the interests of the Bahamas Gov to buy CEG’s rights back sooner rather than later, so they can control the narrative. Especially, as there’s an election next year.

DYOR. GLA

Starchild

xxx

Business continues to be hectic, hence my absence. The interims showing c$20m debt are clearly of major concern. My frank opinions where we are today without beating about the bush are below.

Scenarios using round figures

1. Ex-CERP assets sale. CERP was merged for £24m/$32m in a fire sale when PoO had collapsed. It included known debt of 2m (paid by Trafalgar), and unknown debts of $5m, but also substantial tax credits of >$25m net. Furthermore, if Trinidad assets were sold within 2 yrs of purchase (Aug 2020), IMO Heritage may have rights to a cut. IF IF IF ex-CERP could be sold for the same price £24m/$32m in Aug 2022, CEG would pay all its debts ($20m) and be left with $12m. Our remaining assets would be (a) Uruguay, but farm-in under the current anti-drilling climate may be almost impossible, so is it worth spending $1m on fees just in case? And (b) Bahamas, which will mean spending a max $5m on Gov fees until 2024 out of the $12m cash left with the hope of a farm-in if the Percy-1 autopsy merits it. $5m assumes no Gov discount.

2. Merger. CEG shareholders would get cash or shares. Ironically, if the above ex-CERP valuation is met or exceeded, and the buyer doesn’t want Uruguay or Bahamas and lets the licenses lapse, we would get $12m + the value of a potential future monetization of Percy-1 data for anyone drilling in the region. Let’s assume this value is zero. $12m/£9m is approx 50% more than CEG’s current Mcap.

3. Forced asset sale or attempted liquidation by an unfriendly creditor taking the matter to court. See points 1 and 2.

4. Cash injection by a 3rd party. Based on the massive share dilution, it will be akin to a merger as it would include $20m debt payment and capex to spud S3 and Suriname etc.

5. Swap debt for equity. Similar to point 4 unless some of the debt is discounted.

6. Do a deal with local firm owed for S2, to drill S3 and keep almost all production. If a success, CEG can develop S4+ with that firm or others.

7. Offer creditors ‘fair’ interest only payments for 3 years to allow CEG to find a solution.

8. Attempt to get farm-in partners for S3 and Suriname (and Bahamas) and try to keep creditors sweet until August using the justification of the 2-year transfer issue in point 1. IMO, the main creditor appears to be Stena for $12m. They are key.

9. CEG to find an out-of-the box solution not covered above. Or are working on one but it’s not in the public domain yet.

Today we are on point 8 but I would argue Hurricane were in a worse position last year compared to CEG today. PoO is helping for the foreseeable future. FTR, had I known about a $30m hole in March I would not have marked CEG Buy, nor have taken part in both the OO and Placing. However, I have no intent to sell any shares. And have not.

DYOR. GLA.

Starchild
https://www.lse.co.uk/profiles/starchild

I’m not enamoured by the trolling, goading and gloating from apparent ex holders. They forget there are real people with paper losses, and this is not a virtual computer game where the objective is to hurt or kill the enemy. It must also be said, if this BB and similar outlets are being manipulated by anyone acting on behalf of (eg) another oil company or individuals with undisclosed conflicts of interest, this is potentially actionable by CEG and its shareholders. At least severe reputational damage.

One major holder sold at least 19.5m shares in 2 trades yesterday within 21 seconds of each other. One was delayed by an hour, the larger shown after close. It was 1 transaction. If they had > 3%, this should be shown in a TR-1 shortly. The only way to execute such a large trade(s) is to contact one of CEG’s 2 brokers. Had they believed a disaster was looming, they would not have quoted.

Analysis and assumptions

1. The latest accounts stated up to $15m is potentially due within 12 mths. What was not disclosed was cash held. If CEG had $5m, then net max debt is $10m. We await interims.

2. The financials also stated CEG has stopped burn rate and expects net cash inflow of $2m/yr, perhaps more (@ Sept PoO) with additional cost cutting and maybe a S3+ farm out that results in decent production and % share.

3. CEG is generating c$10m gross even at 400bopd x$70/b. However, it has fallen out with PRD for reasons unknown. These niggles appear to have started when PRD made a public offer in the middle of the CERP merger.

4. CEG has huge potential SWP exploration assets subject to Capex or farm-out. To a lesser extent Suriname, which too can be JV’d to save $700k capex. I will leave aside Bahamas.

5. CEG has T+T tax credits worth >$25m net

6. Unless absolutely necessary, it will be daft to do a placing now as a max 700m shares can be issued without an EGM.

Solution roadmap

A merger? If T+T assets were sold <2 yrs of the Aug 2020 CERP merger, 18% (?) is due to Heritage. Regardless whether now or > Aug 2022 the new owner would save annual $3-4m G&A to add to the $2m point 2. Plus the mega potential in point 4, less debt at the time.

These and other points could help justify keeping undisputed creditors ‘sweet’ for now. Key messages: …. ‘Give us a few months so we can find solutions to S3+ LC and the stuff in Starchild’s point 4. If we can’t, we’ll search for a CEG suitor or do a placing in the summer. Either way, you’ll be paid in full and a bit extra for the delay. There’s no point using the courts as it can take 2+ years, a load of hassle and mega legal fees. So CEG has a roadmap for your debt and a light at the end of the tunnel. Win win…..’

DYOR. GLA.

Starchild
https://www.lse.co.uk/profiles/starchild

‘Bad’ Druid: I find your written comms ‘skills’ as confusing and irritating as this customer’s verbal ones: https://www.youtube.com/watch?v=CNTM9iM1eVw GL anyway.

The new gov came into office when Parliament opened yesterday. Coincidently and less newsworthy, on the same day 7 years ago I first became a BPC/CEG shareholder.

Refer to the full list of the Gov’s manifesto in the equivalent of the Queen’s speech broadcast a few hours ago https://ewnews.com/read-the-full-speech-from-the-throne

Extract from a key para in full…

“…..My Government will work to ensure that the natural resources of The Bahamas benefit our people.
My Government will strengthen legislation that established a Sovereign Wealth Fund.
My Government proposes that all of its non-financial assets will be held in this fund for the benefit of generations of Bahamians.
My Government will provide the legal, fiscal and regulatory framework with the creation of the Ministry of Natural Resources and the Environment.
My Government will secure Carbon Credit payments for our natural resources…..”

I think it is very wise that the new Gov created one Ministry dealing with the environment and natural resources which logically includes a county’s energy sources such as wind/solar/wave/gas/oil. There was no mention of banning oil and gas exploration. Furthermore, countries do not get massive negative carbon credits for exporting oil and gas, only burning the stuff within their territories. (This excludes CO2 emitted from a FPSO, oil platform, or tanker)

Off topic: I found it interesting that many traders are betting on $100/b PoO, and some even $200. Read https://oilprice.com/Energy/Oil-Prices/200-Oil-Traders-Are-Betting-Big-On-A-Global-Energy-Crunch.html

On topic: Major oil companies may now be interested to farm-out discussions based on the apparently friendlier administration now in office and the potential massive upside if oil is found at current/projected PoO. This is contingent on the Percy-1 autopsy meeting or exceeding expectations. After it has been presented to the new administration as contractually obligated, CEG will make it public for a heads up.

DYOR. GLA.

Starchild
https://www.lse.co.uk/profiles/starchild

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