NigWit question18 Aug 2018 20:37
Nigwit, I am a very infrequent poster here, but have invested in Reabold. There are some issues, which I will come to later, but I don't think there is anything suspicious as to why they have raised the money on AIM. Firstly, the two founders are both ex M&G oil fund managers/analysts. Their background is public markets. They have a genuinely blue-chip investor based (very unusual for AIM), predominantly people they know from their time in the City, and nearly all these fund managers will only be able to invest in listed companies. I am also ex City and the checks I have done with the oil and gas analysts I know and trust have come back positive. Secondly, being a listed company is the easiest way for them to execute their strategy as it gives them a means of raising and importantly returning capital easily. Thirdly, it gives them the easiest way to make money - largely from the share options they have granted themselves. This point is not much commented on, but there is dilution of 12% from their options at prices up to £1. They could make themselves very rich!
I genuinely think they are on to something with their strategy and have been pretty selective with what they have got involved with.
Now to the negatives:
1. They will not drill 5 wells before Xmas, so some will be disappointed. The Colter well has been delayed. It is still awaiting environmental clearance. The company says this is a formality, but hasn't really explained why it hasn't been received yet. The local Bournemouth press, whilst obviously bias, is suggesting nothing will happen before winter. Also, if you look at the Information Memorandum they published for the Romanian assets (Parta) last week, the timescale for drilling was given as Q4 2018/Q1 2019. In my experience it is usually the latter date that is more accurate! This is a delay, which few have commented or picked up on. The fact there will be delays is not a big issue for me, but some investors on AIM have very short timespans and will not be happy when delays happen.
2. The drilling for the two Romanian appraisal wells has yet to be funded (another investor is being sought to put in $2.5m). This is a bit concerning, especailly as management have said this is their most exciting prospect. I'm not entirely sure why this is or why Reabold don't take a bigger stake (I know they have the option to invest more). This may be nothing, but worth highlighting.
3. They don't have any operational expertise. They have to find good assets AND good operators. It also means they don't have full control over project strategy. Not ideal.
4. The company has no infrastructure - it is literally the two founders (don't know if they have a dog). Needless to say there is very high key man risk, and we have to hope they don't fall out.
As far as I can tell, they have bought into good assets with good risk/reward dynamics, which ultimately is why I have invested.
Hope this helps. I'm sure others will now "correct" what I have ju
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