RE: brent23 Sep 2021 20:19
So... it's not all ranting. Read the last 2 lines first if the wall of text is too much.
Re. the investor warrants - TBH I think the offer was much to generous to II's and retail got screwed. "The Placing was significantly oversubscribed" - indeed. If something is too easy to sell it's probably too cheap. 70,601,945 warrants @16p = 11,3 mio. £ / 15,5 mio. USD. Quite generous on top of the 30p top we had just months before. And after a (much too early) dividend payout -(instead of just strengthening the balance or better yet, a hedging plan).
So now we have a dilution "overhang" for a 15.5 mio. USD cash injection we don't really need. And the 100 mio. bond seems to have been placed without the warrants in mind.
All in all, I'm not very impressed with the financial playbook. IMHO the best thing they can do is to just buyback up to 70 mio. shares /spend those 15.5 mio USD on shares AND keep them in the vault until the warrants are exercised. Those money will come in + they're still restricting quite a bit for a potential acquisition.
If warrants are exersiced @ SP = 20p, then we (in theory) would get perhaps a 0,3p - so that's just fine (ofc. they should still spend that cash on share buybacks IMO). But if warrants are exercised @ 50p we get a 5% drop at least + 9% less dividend per share due to dilution.
When all warrants (another 42 million performance warrants) are exercised we're looking at 12% dilution in total. IMHO good governance is to at least cover warrants with a share buyback.
To put those 912 million fully diluted shares in perspective they had 671 million when I bought the first @0,25CAD mid 2019.
But of course #PTAL is absurdly cheap (regardless of dilution) and investors clearly don't understand where the reserve update is going (Bretana alone will probably double up in the next 2½ years). Capex is also "mature" meaning we have a huge tax asset (worth more than half of the market cap) and not that far to go before the field is fully developed AND of course a river of cash incoming at this Brent price.
Downside is ofc. it's Peru (corrupt and with social disturbances) + there's perceived uncertainty with Castillo in charge (of not so much, due to Peru at least being a power-balanced democracy) - that's just minor noise to me, since Peru need the oil, as a net importer and a 3rd world nation.
So #PTAL should trade with a discount.
Look at the note on page 9 in the latest presentation: "Using the December 31, 2019 NSAI price deck on the December 31, 2020 NSAI reserves, holding all other assumptions constant, the year-end net present values (before tax) discounted at 10% would increase by the following
approximate amounts: 1P - $250 million, 2P - $480 million, 3P - $780 million surpassing the December 31, 2019 before tax net present values"
That is - INCREASE - the eg 2P 830 million USD NPV (before tax) with 480 million.
Silly cheap.
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