Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Carlf: I have bought heavily since the Percy-1 spud result because I believe the SP will increase to more than I paid every time i bought since then. I have yet to be proven wrong on my statement when the SP was at c0.5p (worth 5p now) that IMO the SP had little scope to PERMANENTLY fall below that level. I still believe this is the case, but I'm not suggesting you should agree with me.
The OO/II dilution created a negative. But the positive was c$10m cash to reset CEG. Day traders live in fear of such events as they don't want to lock their capital for months. I don't care. Neither do I care if the SP hits 2.55p today, as IMO there's a lot of triggers over the next few weeks to potentially increase the SP substantially. Some I listed this morning. And Auctus analysts can see 12p near term potential without a full SWP roll out, let alone a major in the data room or a Bahamas farm-in.
I don't read tea leaves, but I do analyse stuff deeply, often sharing my opinions here.
GL
Starchild
Saffron 2 cost CEG $3m capex. Assuming $70 PoO , less $20 extraction costs = $50 gross profit per boe.,….
• 100boed: $50x100x360= $1.8m/yr
• 200boed: $50x200x360= $3.6m/yr
• 300boed: $50x300x360= $5.4m /yr
Deduct from the above gross profit:
(a) Additional G&A unless partly included in the $20 above
(b) Well maintenance, repair, weather downtime
(c) Transportation
(d) Storage if applicable (why sell for $70 if $80+ on the horizon?)
(e) Taxes and royalties. Although CEG is sitting on an $85m tax credit as at 31/12/19, some payments are due on every barrel. At >$75 PoO, an additional 18% SPT is due for $75+. It used to be @$50+ in CERP days.
Rhetorical questions:
1. How quickly will CEG get an ROI on its $3m capex if S2 production is 100, 200, or 300boed? I would argue even if only 100boed, an ROI can be achieved in 2-3 years subject to PoO >$65.
2. How fast can CEG self-fund Saffron 2-9?
3. When will an updated CPR be done for reserves?
4. When should CEG access reserve based or infrastructure lending?
5. Will pre-pay be used as in a bull market it may be inexpensive. Or store some crude in anticipation of a PoO increase?
6. And/or will CEG use its Bizzell facility in full or in part by the 31/7/21 deadline, where the funding bar is currently set to 8p SP? Remember the Bizzell deal is a slightly unusual CLN as only a maximum half can be converted to shares, the rest is a traditional repayable loan using shares as security (at 12% if I recall).
Depending on the answers, will CEG hit its target of 2500boed by Dec 2021? And if it does (or is projected to do so by 1Q 2022), where will the SP be by year end assuming PoO is +/- $70/b? What if it’s $90? And what if CEG gets a Bahamas farm-in 4th qtr?
Yesterday, more than 25% of all trades were mine as I purchased 500k more shares in 5 x 100k chunks. Why?
My analysis: PoO will meander its way to a large increase, Saffron 2 will NOT be a failure, Stena will settle in cash/shares, the Percy-1 autopsy will be OK, and the Bahamas license will be renewed opening the door to farm-in interest. In the unlikely event the Gov does not renew, CEG will sue for gazillions all the way to the Privy Council (if need be) which will be settled out of court (re-instatement of licenses, CEG concessions and cash) if the opposition wins the May election.
Refer to my previous posts for in-depth analysis, but always DYOR and make your own trading decisions, as I could have misread the tea leaves.
Watch this space.
IMHO. GLA.
Starchild
https://www.lse.co.uk/profiles/starchild/
Bohemia: your figures do not add up again. If 200,000boed, royalties are 12.5% for first 75k, then 15% for the next 75k, then 17.5% for the next 50k. Average 14.69%! Plenty of pie for CEG to share with a major and Gov, to make everyone fat and happy. Comparable, if better ROI for a UK major with a 75%-25% split vs 100% North Sea.
Bohemia: Respectfully, I find you recent posts a little irritating especially as you admit to shorting CEG with an open CFD. And you read my comments as if they are an RNS and analyse every word in 3D.
I believe your last post is flawed. Why?
Firstly lets agree to agree on one point: Norway vs UK/Bahamas tax/royalties are punitive.
Secondly I disagree with your comment UK vs Bahamas royalties/taxes are similar. Refer to https://www.gov.uk/topic/oil-and-gas/finance-and-taxation for real time UK tax intel. The facts:
UK taxes
1. UK tax is 30% for HC companies
2. UK supplementary tax is 10%
3. PRT was abolished since 2016, however if PoO hits $100+ boe long-term this will likely be reassessed by the UK Gov. But for now, let’s assume it is zero.
Bahamas royalties
1. You wrongly stated the royalty rate is 20%. This is NOT TRUE. Refer to page 8 in a blast-from-the-past presentation https://d1ssu070pg2v9i.cloudfront.net/pex/bahamas/2017/07/07132756/firstenergy_conference_london_-_september_2011___2mb.pdf
2. The Bahamas rates are between 12.5% and 25% plus ZERO corporation tax.
3. A decent FPSO can harvest 100k-150k boed. So…..
4. IF CEG makes a future massive discovery with a farm-in partner (Percy-2), the royalty rate is 12.5% - 15% unless there are 2 FPSOs harvesting oil which would risk giving the Bahamas Gov and enviro activists an aneurism. I can’t imagine 2 or 3 FPSOs bobbling up and down the sea within a few miles of each other being approved in the current climate.
Key conclusions
• IMO, a UK based major will potentially be better off (net profit) if it owns 75% of Bahamas production vs 100% in the North Sea. A Norwegian based major would be much better off.
• The major could save on extraction costs due to Bahamas’ proximity to USA infrastructure (vs an ultra-deep sea well in the middle of nowhere). Possibly $30-35/boe extraction cost.
• At 12.5%-15% royalty rates, with CEG keeping a 25% interest, a major can get a very good ROI
• CEG shareholders would do very well from future dividends
• The gov could pay off its national debt or open a sovereign wealth fund
• And if PoO hits $100+, it’s a win win for everyone.
The above form very strong USPs when CEG executives pitch to the majors. I would cheekily argue even an intellectually gifted DOLPHIN trained in basic sales skills could close the deal. (Super smart dolphin? Watch https://www.youtube.com/watch?v=KMZ7oOCXfP8 )
Assuming the license is renewed in approx 2 weeks and the Percy-1 autopsy meets or exceeds expectations, why wouldn’t majors want access to the data-room? And why wouldn’t they bid to pay some up-front CEG back-costs, especially if seduced with CEG shares and a chance to benefit from a fully funded Uruguay spud and discovery? Caveat: I could be wrong an no farm-in happens, so DYOR.
IMHO. GLA.
Starchild
https://www.lse.co.uk/profiles/starchild/
Ppalmer: Fret not. Your BPC shares have been converted to CEG shares (the renamed company) and converted 10:1. As for these being worthless, it depends what happens in the next few months. Refer to my post from last week on expected newsflow and DYOR rather than relying on anyone pro or against CEG on this BB. GL!
All: The delayed buy/sell for c£100k yesterday was almost certainly an interconnected transaction (including a small fee) and therefore somewhat irrelevant. For example a PI moving shares to/from and ISA with the participation of their service provider. Or moving nominee held shares to another provider. The 2 transactions did not even register on the LSE. Had these been real, from 2 different non-connected parties and by pure coincidence for the same number of shares, the bid/ask would have changed substantially depending on timing, based on the 4m volume.
A clarification on my post yesterday morning. ‘North Sea royalties’ should have been stated as ‘North Sea royalties and direct/indirect taxes’. Bahamas taxes + royalties are a lot less compared to how much majors pay to the UK and Norway etc. This is only fair considering the Bahamas is a wild cat region with CEG shareholders taking all the risk for eventual success. Had these eventual gov payments been higher, it is unlikely CEG (BPC then) would have taken the risk unless PoO was expected to remain at $100/b+ for decades. They took the risk at the agreed royalty/tax rate in good faith knowing there was scope to share the risk/reward with a farm-in partner, and the pie was big enough to do so commercially.
Parpaing: very gracious of you to recommend I should be a NED on the CEG BoD. I would ensure 2 RNSs a DAY! Alas, in the unlikely event it was offered I would be a bit embarrassed if I were named in an RNS at 0700, and by 0900 the CEG SP collapsed. An alternative to create publicity and keep my anonymity is the RNS could state ‘Starchild’, however I suspect this will fall foul of many AIM disclosure requirements, although mainstream media would probably write articles due to this absurdity, which could help publicity!
Be assured, the company does read these message boards. I’ve heard from 2 reliable sources that some deleted posts across these BBs are reported by AIM companies direct to LSE and in some cases commentators have been banned. Freedom of speech allows for negativity, but not manipulation (pump, dump and pump again), corporate/BoD libel or blatantly false information to influence market sentiment.
Furthermore, I have and do continue to email suggestions to senior CEG execs and have spoken confidentially to two BoD members and one senior exec over the last few months. During those calls I have never been given insider information. I would never disclose some of the more sensitive matters I asked to be discussed or certain suggestions I proposed.
GLA.
Starchild
https://www.lse.co.uk/profiles/starchild/
Two separate interesting research notes below. They are non-connected, other than they impact CEG.
‘The last oil boom insight’
https://www.bcg.com/publications/2021/preparation-for-last-oil-price-boom
The article suggests an oil boom is about to take place. Majors have substantially cut back on exploration capex based on covid-19 demand destruction and from environmental pressure to diversify from HCs. If the Percy-1 autopsy meets expectations, CEG has 2 advantages ‘selling’ a farm-in to an oil major:
1. Proximity to US markets and infrastructure
2. Net return to a major. All operate internationally and many of their producing oil fields or 100% owned prospects are in regions where gov royalties and taxes are punitive. Even if CEG retains 25% after a Bahamas farm-in, a strong case can be made that the major will be left with more net revenue per boe compared to its fully owned licenses where royalties alone are punitive. For example, the North Sea. Even if CEG gets 25% after ALL capex recouped, the major will be left with more net profit per boe.
Also watch Dr Zak Phillips’ 10 min interview from March 2020 proposing the possibility of $100/b+ PoO in 2022/23. https://www.proactiveinvestors.co.uk/companies/news/914647/oil--may-rebound-above-us100-by-2022-due-to-lack-of-investment---proactive-s-zac-phillips-914647.html
Slightly off-topic, the main argument from anti-oil enviros is pollution, greenhouse emissions and global warming. To a lesser extent, concerns that an oil tanker or platform can explode or sink resulting in a mega spill. Even if new tech can create cheap clean alternative fuels, the world needs oil for foodstuffs, fertilizers, plastics and chemicals.
Trinidad’s SWP potential
https://www.edisongroup.com/wp-content/uploads/2019/07/Trinidad-Trinidad-New-energy-to-low-cost-low-risk-region.pdf
The article provides insight into SWP peninsula’s potential. CERP is mentioned 18 times and worth a read. IMO, if Saffron 2 meets or exceeds expectations next week, the 200-300boed additional production is OK (a +/- 50% increase to now), but the gamechanger is the potential de-risking of 9 Saffron lookalikes, which could open the door to reserve based lending subject to a CPR.
IMHO. DYOR. GLA.
Starchild
https://www.lse.co.uk/profiles/starchild/
Fatalcharm: I’m grateful to your recent positive comments. There’s a small group of posters on this BB who bombard CEG negativity giving the impression they are the many. Some openly admit to shorting, or just want a lower entry price; others are angry ex-CERP/BPC holders who all repeatedly doubt my motives. I have invested >£300k on CEG and have several million shares, but I am NOT a paid publicist nor get paid to post on this forum. My 1 or 2 researched posts a day written in good faith is because it kept me sane during lockdown, I enjoy doing so and believe there’s a light at the end of the tunnel. But that’s just my opinion.
Over the last few mornings, I wrote three interconnected in-depth posts on the possibility of a Bahamas Farm-in. Although shareholders’ short term focus is Trinidad news (RNS update arrived today), what triggered those posts was a recent article https://d1ssu070pg2v9i.cloudfront.net/pex/bahamas/2021/06/08101654/Upstream-Article-4-June-21.pdf on CEG’s continued intent to get a Bahamas partner.
My interconnected posts
• ‘IF (part 1)’: Friday 03:32
• ‘IF (part 2) The Plan’: Saturday 03:43
• ‘Can CEG ‘sell’ a farm-in?’: Sunday 2021 07:22
I invite real shareholders to read them and provide constructive feedback, if not already done.
The elevator pitch of my 3 posts
I attempted to value CEG’s potential based on precedent, analysts’ opinions, and lots of Ifs. I then put forward a case how a farm-in with a major including some back-costs can be structured to give the farmee a potential massive ROI across CEG’s portfolio. I attempted to justify how the farmee could hedge its CEG bet and substantially subsidise its Bahamas Percy-2 spud Capex. The key: for the major (or consortium of large investors), to be given free shares as a sweetener. The example I gave was the farmee would pay CEG $50m towards $150m for its back-costs, but in addition to owning 75% of a Bahamas future success, it would be given 90m news shares (c10% of the company).
If the above was announced in an RNS, the SP currently <3p would surge TWICE. Why?
Firstly, with $50m in the bank, CEG would have the funds to spud Uruguay which it would own 100% at the asset level.
Secondly, leading to both FULLY FUNDED and committed spuds, CEG’s Uruguay one (100% owned) and the farmee’s Percy-2 spud (CEG 25% owned) the SP will surge further leading to the spud results.
The 90m free shares would at that time be worth a substantial sum and should the farmee decide to de-risk some of them, it would make a huge ROI to subsidise the Percy-2 spud capex. It would be a good risk/reward hedge.
As a separate side-point, I put forward the case using precedent from Aug 2018, how CEG’s Mcap could reach £156m again (worth c20P SP today) or more, purely on an RNS announcement a major was sniffing around the Percy-1 autopsy data room.
I invite you to read those 3 posts. Caveat: I am not making a prediction a farm-in will happen, merely providing rationale arguments why CEG is in a quite unique position to leverage one and how IMHO it can be structured.
Have a great day. DYOR and GL
Starchild
Assuming the Bahamas license is renewed, and the Percy-1 autopsy meets expectations, what is CEG’s next objective? To get majors in the data room. If they like the data or intrigued with what lies at the Jurassic level, they may want to play.
1. Precedent: in Aug 2018 a major paid $1m for exclusivity. Result: the SP soared and BPC’s MCap hit £156m. This is c20p SP today as there’s c800m shares. It could be argued, if this happened tomorrow, the MCap could go even higher as there were no CERP assets nor Uruguay then.
My ‘cunning’ plan posted yesterday, was a conceptual one and not a prediction. The ideal farm-in will be at the asset level only and for CEG to receive cash towards its $150m back costs. The alternative will be to leverage new shares as incentive. Although dilutive, it doesn’t cost CEG anything, and the SP will rise due to 2 fully funded mega spuds.
2. Precedent: a mini-me version was attempted with Stena for 10% at the asset or share level in return for $10m. (Source 26/5/20 RNS, section ‘Investment options’ https://polaris.brighterir.com/public/challenger_energy_group/news/rns/story/rdzqj8w )
Potential ROI could be good to a major (or consortium of investors GNEISS could seek) as CEG will have the capital to spud Uru-1, develop ex-CERP assets, and/or M&A. Nothing will compel the major to keep its shares as they will still own substantial asset level rights.
3. Fact: fully funded mega spuds usually result in massive SP rises leading to the result. The major could sell its shares and recoup capex leading to spuds x 2. This is not fleecing PIs who love to have a flutter with the hope of a 10-20x bagger.
BUT do majors pay cash for non-commercially proven acreage?
Yesterday, according to a self-professed farm-in ‘expert’ who regularly posts negative CEG commentary (and I suspect has no CEG shares), the answer is NO. Perhaps s/he should offer CEG h/er consulting services to put them straight.
Rebuttals
a. CEG believes Bahamas can be monetized. If impossible, this implies incompetence, inexperience (for chasing rainbows), or misleading investors.
b. Royalty rates are decent for JV pie sharing.
c. North Cuba is near USA infrastructure.
d. CEG believes a farm-in can be done for Uruguay (probably leverage for the above). It would have been daft to commit $1m for Uru-1 and akin to paying a $1m deposit on a property deal, with no hope of ever getting the $40m funds to complete the purchase.
e. Farm-ins happen all the time. Examples: https://keyfactsenergy.com/news/?news_type=5 . You will note not all deals disclose the cash terms nor the major involved.
f. What if PoO reaches $100?
Bottom line: depending on the Percy-1 autopsy, I believe farm-in deal can be done at the asset and/or share level by leveraging CEG’s asset potential. And an RNS stating a major is in the data room will surge the SP.
IMHO. DYOR. GLA. Let’s be polite.
Starchild
https://www.lse.co.uk/profil
Refer to yesterday’s IF (Part 1), otherwise this post will make no sense.
If I were an advisor to CEG execs, I would recommend the following CUNNING PLAN and help implement it:
Assumptions:
1. The Bahamas Gov renews licenses on 1/7/21
2. The Percy-1 autopsy meets expectations
3. Pro-analysts independently verify the figures
CEG is arguably unique for a small AIM oil company. It is producing little although its potential for growth is good based on ex-CERP assets. However, it owns two huge assets: high risk/reward exploration licenses in Bahamas and Uruguay acreage with very little capital to develop them. The sum of the parts can possibly be leveraged to give a major (‘BigCo’) the opportunity to recoup all its capex in the event Percy-2 is a DUSTER. How?
I will use example figures to illustrate the plan.
1. BigCo acquires 75% rights to Percy-2’s future discoveries and production for 90m CEG shares
2. BigCo’s 90m CEG shares will be @40p each, resulting in CEG receiving c$50m cash. This is approx one third of Percy-1 back-costs
3. BigCo will commit to spud Percy-2 in 2022/3 which will cost c$50m
4. CEG will commit to pay all costs to spud Uru-1, from the above $50m
5. BigCo will have spent $100m inc Bahamas rights, spud and 90m CEG shares
6. BigCo can sell the shares at any time without it effecting their Bahamas rights
7. If BigCo wants to keep its shares, it will get a huge ROI if Uru-1 is a success. If Percy-2 is a success, BigCo will get a double whammy both from its 75% rights and CEG shares.
8. If BigCo wants to de-risk all or some of its shares it could potentially do so at up to double the 40p price. Why? With 2 fully funded billion-barrel spuds, CEG’s SP will SOAR with PI FEEDING FRENZY approaching both spud dates which should be timed at about the SAME TIME.
The outcome
9. CEG gets 2 company making mega spuds for ‘free’ paid for by BigCo.
10. BigCo can potentially sell its shares for +/-$100m during pre-spud excitement, which will mean the Percy-2 spud will have cost them ZERO with a potential massive ROI if commercial.
Key point: refer to yesterday’s ‘IF part 1’. If you disagree with my SP/Mcap figures, use yours and adapt the above. I’m illustrating a generic plan and it’s up to pro-analysts to recommend the actual figures.
If you are BigCo what can possibly be the downside? Win big or potentially lose zero. Which of these top 250 will FIGHT to get into the data room first? https://www.spglobal.com/platts/top250/rankings Last time was Aug 2018 and Mcap hit £156m! (= c20p today)
When playing Chess, an innocuous pawn move, 5 moves previously can be a game changer. In CEG’s case this may have been Uruguay, which is why CEG’s overall portfolio is quite unique and could be leveraged. Checkmate.
Opinions to test this plan welcome.
DYOR. GLA.
Starchild (or Baldrick?)
https://www.lse.co.uk/profiles/starchild/
Stena can do Uru-1 spud if th
ooooops, sorry, my ps was truncated....
Part 2 tomorrow. The cunning plan itself: how a major can recoup most of its capex even if Percy-2 is a duster. You can then judge for yourself if I should rename from Starchild to Baldrick
Plausible events that could trigger a CEG SP surge, with the caveat I’m not predicting it will, nor posting a DEFCON 1 nuclear ramp:
Firstly, lets deal with MCap rather than SP, and work backwards. Secondly six IFs are needed, for all the CEG ducks to line up:
1. If the Bahamas license is renewed on 1/7/21
2. If the Percy-1 autopsy meets expectations
3. If a farm-in happens involving a free Bahamas drill and cash for at least 33% of $150m back-costs paid: $50m
4. If CEG retains 25% of the Bahamas asset
5. If CEG states it will self-fund a Uruguay spud from point 3 cash (>1Bboe)
6. If Trinidad + Suriname = TOTAL success
Based on analysts’ predictions leading to the 2020 Percy-1 spud, the MCap was estimated to reach c£200m. Due to the LOL overhang and EA court case, it only reached £110m on 21/1/21 (2.35p x 4.7B shares). Note: On 4/2/11 it peaked at 25.7p/£220m Mcap. And in Aug 2018 reached £156m when a major was in the data room pre CERP merger.
Key point 1: What if an RNS states a major is in the data room again? Undisputed fact: £156m Mcap was reached with the HOPE of a farm-in. If this precedent is repeated = 20p SP.
IF 1-6 happen?
(a) Uruguay spud 2022, 100% owned, fully funded. I’ve used Percy-1 analysts’ pre-spud value of £200m, as Uru-1 is its twin.
(b) Bahamas Percy-2 spud, 25% owned, free drill(s). £200m (Xref key point 1)
(c) Valuation of ex-CERP assets? In Dec 2020 Auctus proposed £250m-300m MCap for ex-CERP assets alone. If CEG reaches 2500/boed end 2021, with 4000/boed in 2022 and $25m/yr free cash, as PoO is higher, I’ll use Auctus’ £300m valuation.
(d) Positive market sentiment knowing an OO/Placing/CLN will unlikely ever happen creates uplift to MCap. My guess: £50m
Key point 2: A + B + C + D = £750m Mcap. 1B shares inc Bizzell, warrants, options and a Stena settlement = 75p SP. BUT, to be conservative let’s call it 50p.
As I’m having an ‘IF’ fest, I’ll use a few more using Kipling’s words, with minor edits …
‘…..If you can make one heap of all your winnings and risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings never breathe a word about your loss;
If you can talk with CEG de-rampers and keep your virtue, or walk with Kings—nor lose the common touch,
If neither shorters nor ex-LTHs can hurt you, if all men count with you, but none too much;
If you can fill the unforgiving minute with sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it, and which is more you’ll be a Man, my son…..’
Key point 3: The above 50p-75p SP is NOT a prediction on my part nor a mega ramp. It is fair analysis based on past performance, precedent and pro-analyst opinions caveated with many IFs. Frankly, we’ll all be ecstatic if SP reaches 10p soon and 20p in 2022.
IMHO. DYOR. GLA.
Starchild
https://www.lse.co.uk/profiles/starchild/
Part 2 tomorrow. The cunning plan itself: how a major can recoup most of
Zag: thank you although aggrieved you state my morning's post is inaccurate. I would never wilfully do so. Are you still hoping to buy in at 2.5p? Karma old chap.
You gave me an idea about 'if'. Read my post tomorrow morning. I have a cunning plan.
Starchild
Bohemia: respectfully, your post casting doubts on the £2m Bizzell advance is irrelevant. I believe we both agree, following the OO/Placing (c$10m cash), CEG has $20m in the bank minus £2m Bizzell (if it hasn't been advanced this week as promised), minus $3m for the S2 and Suriname spuds. This leaves as a worst case scenario of approx $14m in cash reserves. Of this, $4m is due to LOL in June, leaving $10m.
CEG does NOT need this $10m until it settles with Stena et al for legacy Percy-1 costs. The bills amount to $14m although $7m is disputed. If there's an amicable settlement involving all or some shares, CEG will potentially not pay a penny and keep $10m in the bank for development of ex-Cerp assets. If this goes to court, it will take several months at least, potentially well into 2022.
I am not suggesting CEG gambles winning the court case (in the unlikely event it ends up in court), by using monies it may be ordered to pay. That would be as daft as owing a disputed tax bill to HMRC for £1m, and using cash reserves in a casino hoping it will create winnings to pay the HMRC debt if the tribunal rules against . However the point I am making is CEG does NOT need Bizzell's £2m cash now and as such your post is I believe, mute.
Starchild
Following the company reset, imagine CEG was a newly launched IPO with 800m shares @3.5p. A £28m Mcap start-up which acquired all BPC and CERP assets.
Assets:
1. An experienced work force
2. Cash in the bank following OO/Placing, $20m (?) less $3m S2/Suriname spuds (source
https://d1ssu070pg2v9i.cloudfront.net/pex/bahamas/2021/04/28113530/Auctus-BPC-27.04.2021.pdf )
3. 450-500boed production resulting in $3m/yr cashflow (@$60 PoO)
4. Trinidad potential: a 230mboe North Sea size oil field in the SWP
5. Suriname potential
6. Bahamas farm-in potential and monetization of BPC’s $150m spent to-date
7. Uruguay potential
8. Potential lawsuits against the Enviros and their backers
Liabilities
9. Lol $4m
10. Stena $14m ($7m disputed, so I assume $10m)
Issues
11. Capital requirements for expansion
12. If the Bahamas Gov declines 3-year renewal
Would I invest in such an IPO? Yes, and I did in the OO and placing.
Why? I see various value triggers for upside with spread risks.
So why is CEG’s Mcap down to £20m? IMO there are two gorillas in the room scaring investors. Not so much whether S2 is a success as it’s not a make-or-break spud on par with Percy-1. However, S2 is a proof of concept that unlocks access to funding for future spuds and production, possibly with a non-dilutive RBL.
The key uncertainties revolve around (a) CEG’s net cash position. This will be resolved when a Stena deal is announced. And (b) the Percy-1 autopsy meeting expectations and license renewal approval.
This will be a key value trigger when clarified. Why? Pre-CERP merger when BPC was a one trick pony its MCap fluctuated between £8m (2017) to £200m+ at various times over the last 11 years. On 9/8/18, a high of 7.45p was reached. It was when a major paid $1m for exclusivity to the data room. On that day, 2.1B BPC shares @7.45p created a Mcap of £156m. PoO was $70.
Key point: just because Percy-1 was not a commercial success, does not mean Percy-2 or 3 will not be. We await the autopsy for clues. North Sea and Guyana’s spectacular successes began as failures.
Anyone that invested in Dec 2017 @0.45p would have got a 16x bagger had they sold 9 months later. So, could this happen again if a farm-in is announced? The market currently values the chances as zero as reflected in today’s MCap which absurdly is less than CERP’s £24m merger value. Let’s not forget Uruguay could possibly be leveraged…. ‘Agree to Bahamas farm-in including some upfront cash re $150m spent, and CEG will self-fund Uru-1, but you can own a small Uru-1 chunk free’….
Even if a farm-in doesn’t happen, CEG has potential value triggers in Trinidad and Suriname, which prior to the CERP merger in Aug 2020 it did not have.
IMHO. DYOR. GLA.
Starchild
https://www.lse.co.uk/profiles/starchild/
Ps: some informative posts yesterday on LGO/CERP’s ancient history. Even from those that I occasionally have handbag fights with. Thank yo
Thebhoys: I'm sorry you found my billionaire joke offensive. When i posted yesterday afternoon (which is rare), I noticed a post implying I'm a stupid investor or a millionaire that has spare money to burn. The post has since been deleted so my 'joke' this morning probably made no sense. FTR, I did not report the post. Frankly i do not have the time to read this BB in real time and tend to do so first thing in the morning.
GL
Starchild
ps.. you owe me £10. I'll start a slate for you and if it helps, your slate can eventually be paid in CEG shares based on the SP at the time/date of the derogatory comment.
There was an interesting article in the Times yesterday entitled. ‘Overseas territories to be left stranded by G7 tax reforms’. Although it didn’t place the Bahamas in the top 10 at-risk jurisdictions it did paint an overall bleak picture. Refer to http://www.tribune242.com/news/2021/jun/07/bahamas-cant-be-burnt-over-15-corporate-taxes/ how this may eventually affect the Bahamas where financial services account for the 2nd highest contribution to GDP after tourism.
First a devastating hurricane, then Covid, now this. If the government declines to renew CEG’s license on technicalities it will be faced with a lawsuit all the way to the Privy Counsel in London. The Gov will be wise to renew the license on 1/7/21 for 3 years. If renewed and CEG cannot find a JV partner or drill in 3 years, the license will be forfeited anyway without the Gov facing a lawsuit nor the opposition party making mileage of the matter so close to a general election. If though oil is found the royalties will be substantial to an economy facing even more headwind.
As a separate matter, Monecor dumping c40m shares (400m pre consolidation) explains the drop, probably compounded by auto stop/losses. Monecor UK and Europe use a trading name of ETX Capital which is a big player in CFDs. The group was recently acquired by Swiss based Guru capital. It is possible Monecor clients (or a major client) leveraged CEG shares ‘long’ and dumped the shares bought in the Placing, to exit the bet last week.
However, three key results if positive will please the market: the Saffron 2 spud, Bahamas license renewal, and the Percy-1 autopsy. If all 3 meet expectations, the SP should logically increase substantially which in turn could help resolve the Stena payment dispute using shares. This would leave CEG with an additional $7-10m in cash. I’d be very pleased if it was at or near the 8p per-share Bizzell funding bar level.
On the subject of funding, I figured if I trademarked the Starchild name and charged one pound when used on this BB, (£10 when used disparagingly) I’d recoup a chunk of my CEG losses. BTW I’m not a millionaire, I’m a billionaire. As long as converted from Vietnamese Dongs, Colombian Pesos or Iranian Rials, to get the Pounds Sterling total.
Brent PoO approaching $73, WTI now over $70
DYOR. GLA.
Starchild
https://www.lse.co.uk/profiles/starchild/
Jono44: before criticising, please get the facts right. I will post here at the weekend (perhaps before) on the ADVFN matter. An ongoing campaign against that organisation is to force changes to its working practices. Their lack of proper moderation on their 'wild west' BBs is subject to several ongoing enquiries and complaints. We have already been partially successful.
Starchild