Potential additional funding via Stena? Some analysis19 Sep 2020 05:09
According to page 25 of the August BPC presentation, our cash needs until 31/12/2022 is just over $50m. Of this, $20m is discretionary (for example: $6m-$10m Trinidad/Suriname) or outcome driven.
For Percy-1 we need $21-$25m plus $5m contingency. Assuming Percy-1 is a success, an additional $5m will be outcome driven for logging/sampling/analysis. Clearly if a duster, we won’t need this latter $5m.
Using simple arithmetic we need $30m. To be safe, let’s add the additional $5m analysis budget (if Percy-1 is a success), which can be used for Trinidad/Suriname enhancement/development if it is NOT. This creates a sub-total of $35m gross, of which we have an estimated $10m in the bank, leaving a funding requirement of approx. $25m net. To avoid complicating matters, I have not added the possibility of a $1m refund to ‘CERP’ from the Spanish Gov, nor a PRD Trinidad asset sale for $1.5m-$4.5m.
The Stena Group have 3 options in return for $10m: 10% equity, 10% of Percy-1 at the asset level, or neither (ie, cash). If they go for either JV option, we only need c$15m.
I personally prefer Stena gets 10% of Percy-1, however there is one major advantage to the overall picture if they select the equity option: Stena, like all other shareholders will NOT wish for further dilution. Could this be an incentive for Stena to ‘lend’ BPC the $15m balance secured on CERP assets, so as to avoid CLNs? In my figures above, $5m is included to enhance CERP assets, as such this security will be even more solid.
Connected to the above, refer to https://www.tradewindsnews.com/tankers/stena-banks-1-2bn-loan-as-loss-grows-in-2020/2-1-870667 . 2 points interested me from this article dated 7th September:
1. Similar to many companies, Stena has suffered due to Covid-19 and has restructured its borrowing despite having excellent liquidity. They are clearly not broke.
2. The quote………’ During August, the company said it had signed new charters for its drillships Stena Forth (95,000 dwt, built 2009) and the 54,000-dwt Stena IceMAX (built 2012), starting in 2021 [!!!!] .These last between 40 and 180 days.’
Bottom line: The Stena JV option was visionary. On successful spud at any-time as early as 2H 2021, it gives Stena the opportunity to potentially sell its 10% equity stake to an institutional buyer or 10% asset stake for a huge ROI…whilst earning substantial revenue drilling a number of other future BPC wells. Now, if the Spud is inconclusive, assuming Stena choose the equity option and help BPC fund the $15m balance ('out of petty cash') using its billion dollar access to lending, it would get all its money back and interest in a few years.
All IMHO as I am not the FD of either company. DYOR. The above would be the type of sales pitch the BPC BoD have probably already done and not a prediction on my part.
Let’s see what happens as I believe news is imminent. Have a great Saturday.
Starchild
xxx
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