Paul Johnson & Oliver Friesen from Power Metal presented at London South East's September Webinar. Watch the full presentation here.
fair points - all possible.
MM must appreciate that the Debt paid for the asset - no debt = no Atomic
and is manageable - pay back form Feb 2022 over 4 years at $1m p/m capital and decreasing interest of $440k p/m - COPL can cover that already as MF so great.
The thing is - thats what we are interpreting based on trawl through the prospectus - AM has not specifically addressed the debt repayment ease in interview or RNS, possibly to refinance so we are left assuming all is ok. Lender did their calcs so it will be ok - its what they do after all.
We know Art has a history, good and bad - I agree he needs to prove himself credible, some quick wins possible here, developing trust has to be a core part of the business plan, for II primarily and we get the benefit on their coat tails.
So far - no more dilution, crazy moves buying multiple African adventures - so good.
Perhaps It has gone so well the market doesnt really believe it :)
MF has been outstanding to date, a discovery in the fed deep first time of asking - by total chance as he had to drill or lose the permit, CUDA insolvent and being sold soon- on a plate if AM positions well, CNOOC cant operate in USA so may also sell, gas price hedge (outstanding call), real II joining, MF gas bullet supply secured for low cost.....
With a backstop of WTI price and demand increase benefit.
What dont you like MM? the font the CEO uses in RNS ?
COPL is a race car on the start line, wheels spinning, rubber laying, smoke pouring, fishtailing in place.
Come on - let it go
great post Illusion - totally agree:
"maybe Arty is doing a better job than we understand at this time."
WI in CUDA he cant disclose until it plays out, adjacent Majors discussions, acquisitions, and deals ongoing, lenders view and refinance options all happening in background
All about positioning - could he have played a better game so far? just some paperwork issues really, nothing material.
Most incisive post of recent weeks goes to LB
"It's a share buyback that would do something. It would actually have a really positive effect on the SP and would have a better ROI than buying another asset or drilling."
Agree completely - once foundation fully established from MF, some expansion of the field by drilling and a net revenue target achieved, then 10% of profit after debt servicing could be set aside for share buy back and retire the securities.
The 10% amount in cash would go up as production increased.
The intent could be RNS - would significantly aid sentiment once rolling and announced each month number of shares bought and retired. AM could even link it to a dividends policy that kicks in once a buy back share target volume is achieved.
Not least the message sent would be dilution is much less likely as a source of funding - it could be just oil revenue and RBL going forward- this is more than possible.
Its hoped Am may consider that option - he will have the funds and can still prosecute the exploration and acquisition campaign without prejudice.
Share buyback and dividends are not solely the preserve of Majors:
"BP will hand shareholders a surprise dividend increase, and $1.4bn (£1bn) in share buybacks, after the company returned to profit after a rebound in oil prices which it believes could last for the rest of the decade.
The oil giant predicted that the world’s demand for oil will reach pre-pandemic levels by the second half of next year, and lifted the value of its oil reserves by $3bn after revising its forecasts for oil prices higher for the rest of the decade."
AM has had 6 months offline to plan the best strategy, it has gone very well:
1 - Operations - MF success way ahead of expectations, increased topside to cope with pressures= higher bopd, bought enhanced plant capacity for MF bullets online now/soon, commenced CC well recompletion prog at low cost - hedged gas prices so reducing opex.
2 - Peer analysis - adjacent Majors with discoveries and extensive drill prog must be watched closely, some opps here for him.
3 – CPR and reserves – Ryder Scott updated CPR on reserves in period Apr-Jul 2021, established 117m barrel oil in place, recovery factor 50% with MF
4 – Exploration and Upside – Fed Deep drill success and a discovery made, 246 ft of net sands – being assessed now – planning on FD field development and drilling will follow flow analysis – huge upside to be exploited – 2-4 CC drills, 20 further BFU infill drills.
5 – Legal and WI – Legal challenge against CUDA for their debt and not being a functioning partner to pay for field development – outcome soon, potential WI could be gained. CNOOC unknown but Biden has not relaxed the stance for them to operate in Continental US
6 – Financial – Cash rich –perhaps $20m on account - minimum spend so far, cost saving measures made - yet many calls on his cash and $20m accordion RBL for exploration and acquisition potential of similar Atomic opportunities.
7 – II investment – major II have joined, multiple £200k-£500k buys – virtual road trip continues
In the background, WTI goes up, demand increasing.
So what is AM planning next, what may be his priorities?
- Secure CUDA WI in some form from imminent sale, Southwestern legal challenge – the payment for this WI may be substantial, unknown therefore a perceived risk, even through the lender has to approve capex and needs to see minimum working capital of $2.5m on account at all times
- Fed Deep analysis and adjustment of overall exploration plan, expected drill spend and production timeline
- Another asset – same issue in terms of how its paid for
Understand all three aspects, plus realised MF production in Q4, finalised churn and the market may start to rerate this
MC has no impediment to growth and many stimulus, current rangebound SP has no bearing on market cap growth .
Nothing is priced in yet - no change from cap out wannabe dilution ATM penny share - with potential - to producer with a fantastic proven asset having an exponentially increasing upside, cash rich and RBL in place to draw down from - awesome position.
Since Sep 1st:
"Oil Production at August 31st is 2,720 bbl./d (gross), 1,604 bbl./d (net) a 24% increase from the operations update on August 17th."
MF increase to maximum 10 MMcf/d
Topside improvement to cope with increased pressures
If linear relationship and 12% compounded growth per week?
36% in 3 weeks, could be 3700 bopd gross by now, but it will come in time regardless.
After costs per month is over $2m profit to COPL - covers debt payment of $440k p/m interest plus $1m of loan capital due from Feb 2022 - right now or very soon.
Once AM can Issue a RNS outlining this cash foundation, solid and increasing proven revenue coming in, ability to pay back debts with money left over - then we shall see, money talks.
So in the background:
NPV value of reserves increasing substantially
Increased rate of MF, higher pressures - increasing production beyond modelled curve
Fed deep testing will be huge if it flows - what horizons viable critical
Would be great if a deal could be done with the drilling company, drill for reduced rate = share of future profits for a set period or as agreed.
Horizontal drill costs approx $6m for 1 mile, $9m for 2 miles
Three drills in FD or CC for example, 2 mile long = $27m
Would use all cash on hand and big inroads into the accordion facility so probably not approved by the lender, but get a discount for these early drills before production ramp up?
Has to be worth a discussion.
Excellent title - some marketing being done is good to see
"The injection operation is taking place in the Barron Flats Shannon unit, meanwhile, as part of today’s update, the company announced a new discovery at the Barron Flats Federal (Deep) unit where an exploration well has encountered six oil bearing intervals....“Our next task is to test all six of the sand intervals through casing over the next several weeks"
Several weeks - 3-7 perhaps? - they may even have some initial results already or indications.
Flow rate less important perhaps as this a vertical drill than which reservoirs were encountered, pressures, API etc. It may be the intent to just complete testing and produce from Shannon by this well as its to be assigned to BFU, even though drilled from the Fed Deep.
Then plan for the deeper horizontal wells in FD at 100% ownership.
The knock on implications for upside are major - as deeper levels in FD then deeper levels in BFU and CC - spans over 52,258 acres (gross) of contiguous leasehold.
"This well is a testament to our team which identified substantial upside below the Barron Flats Shannon Unit, further demonstrating the value of the Atomic acquisition to COPL."
We only have the 31m barrel 2P so far, forming the basis of sale by Atomic
This also assumed a lower recovery rate by RS in their 2020 CPR
Prospectus p54 on CC potential:
"Currently no enhanced oil recovery measures are in place in Cole Creek, but it is a candidate for a future miscible gas flood trial in the Dakota and Frontier 2 formations. Extensive upside potential exists in the area through the drilling of horizontal wells in the Dakota and Frontier formations, as well as additional opportunities in the Niobrara, Mowry, and Muddy formations."
With Shannon = 6 horizons - as found by Fed Deep drill
CC potential reserves/ drilling locations:
"As well, a total of 34.0 million barrels of oil in place from the Lower Cretaceous Dakota Group sands has been identified, with a potential development drilling plan of 18 horizontal locations (8 proven and 10 probable)"
Recovery factor also key, as RS assumed just 22.4% for BFU (page 306) whereas upto 50% may be gained through enhanced MF and pressures - all to be updated and informed to market.
CC recovery factor even lower assumed, page 311 - Frontier at 14% and Dakota at 20%
Field extent is delineated by drilling
The lender has to approve COPL capital expenditure, so measured, planned, business case modelling of competing capex ROI are a brake on any potential AM magpie effect (understandable with all these assets to develop) but will provide ongoing independent DD.
wider market is really poor aswell, nothing seems to move as it did on similar news - top of the risers board today.... OTB at 8.22%, sums it up really.
FD drill discovery and 246 ft of net sands opening up a 100% owned virgin field of 6 horizons....COPL got a 2% rise on the day, should have bagged that day, but it being buried in a global RNS didnt help, it was even stated after the marginal bopd increase for the CC recompletion:
o Successful recompletion of the 3rd marginal/shut-in oil well of 12 at Cole Creek
For this to rerate, it seems the market may need to see a number of business performance milestones achieved.
• Q3 results issued – all regulatory dead lines achieved going forward
• Updated CPR on assets
• RNS of increased production over a sustained period since June
• New plant capacity for MF bullets on line in September estimated – supply confirmed to enable increase to 10,000 Mcf/d gas flood - and the impact of this MF rate reported
• Outcome of the Fed Deep drill - understand the 6 reservoir stacked play potential, funding viability for further drills required in adjacent sections by Wyoming OGC
• Outcome of the CC well recompletion prog, subsequent MF and further 2-4 drills proposed
• BFU 20 infill and prod drill prog planning in progress - RNS of the funding and plan for this, although as noted earlier they agreed no drills in BFU this year with CUDA so for 2022
• Transparent cash flow updates – cash on account, spend rate, key capex costs and timelines - after any WI negotiations.
• CUDA legal challenge and resolution of WI, outstanding sums owed recovered in some form
• CNOOC status understood and their 15% of BFU
• Ability to pay back $45m capital loan position – this is after one year of credit issued, so from mid Feb 2022 - production increase needs to be proven and booked by then to cover capital pay back over 4 year term agreed = average $1m capital p/m in period capital payment plus $440k interest p/m , plus G&A costs - before any further field development considered.
• New debt position if another asset is bought in next 6 months
• Upside of any new asset and its current production
• Overall reserves position update – transition from oil in place estimates to proven and probable
• Macro WTI price, demand in period
• II positioning - signs of the constant churn ending/ slowing as recent week has shown
• Consolidation scale and impact if implemented
• Further dilution potential situation - absolutely none is needed or justifiable at this time.
Thanks FS, good spot.
Seems CUDA looking to sell everything except BFU and hope they can extend the payback terms to their lender based on increased production revenue gained by the MF.
It will take them years to pay of $67m debt, but COPL have increased the worth of their WI substantially across all units - Successful MF campaign-soon to be at the max 10k rate injection, increased pressures inducing topside expansion, Fed Deep drill expanding Shannon scale - to be assigned to BFU, CC well recompletion and overall increase in reserves and their company value on full sale.
Their comms look to be bullish on continuing operation with Wyoming the focus:
"Proceeds from the Alberta sale will be used to advance development and increase oil production of Cuda's major asset at Barron Flats Shannon Secondary Recovery Unit in Wyoming and for corporate working capital purposes."
But they also warn they may not be able to continue business, they have to sell the company assets but does that mean all of them?
If creditors demand payment now, what then?
Southwestern legal action was also to gain first in line for payment:
RNS Aug 13th
"a declaratory judgment as to the lien priority against Bridging and Tallinn to affirm Southwestern's first lien priority on Cuda's security against the Barron Flats Unit"
Past $8m debt key they had with Atomic at deal completion (now an asset of COPLs) as they have no ability to pay this up front, plus other accumulating debts:
"Cuda's current cumulative operating arrears owed to Southwestern for the month ending June 30, 2021 amounts to US$2,495,172.68 as reflected on Cuda's July 2021 Joint Interest Billings. It is noted that the Claim against Cuda will be subsequently amended to reflect Cuda's ongoing cumulative arrears, and any further resulting damages."
Interestingly, in Jan 2021 it was agreed with CUDA to have no further drilling for BFU in 2021:
Prospectus, page 111:
"Until December 31, 2021, SWP, as operator of the Barron Flats Unit, and Cuda agreed not to propose the drilling of any new production or injection wells."
Why would AM agree to that? it helps out CUDA cashflow on % of drill costs this year, on the surface is of no material gain to COPL. Instead this year we have low cost CC well recompletion and one Fed Deep drill they had to progress or lose the permit - alternatively COPL is cash rich as limited drill spend, there is no accordian draw down yet so AM has around $40m funds to access for any WI procurement.
It follows, if MF works much better than expected on Shannon, other Shannon producers in the area will have seen COPL RNS and also ramp up their MF operations - leading to a short supply of the gas bullets - may explain slow comms as AM needed to cement his position on this supply with Tallgrass Midstream before release of much news, the $1.5m deal with them was in the prospectus but not highlighted since.
Its such a big positive worth an update in the ops RNS coming and what this means - short supply of bullets as in the June = lower injection rate =lower bopd = direct impact on revenue
This risk is now dealt with and supply secured.
"Tallgrass Midstream (TMID) assets are strategically located in Wyoming’s Powder River and Wind River basins. Assets include natural gas gathering facilities and natural gas processing and treating plants. TMID creates value for customers by processing and treating natural gas for flow into interstate pipelines and on to a diverse customer base that includes residential, commercial and industrial users. This allows producers to deliver their product in a market-ready form and to recover natural gas liquids (NGLs) – propane, butane and natural gasoline.
With a capacity of 50 million cubic feet per day, TMID’s gas treating plant near Riverton, Wyo., treats the gas for processing at our Casper and Douglas, Wyo., plants. With a combined processing capacity of 190 million cubic feet per day, the Casper and Douglas processing plants are the only plants that provide straddle processing of natural gas flowing on the Tallgrass Interstate Gas Transmission (TIGT) system."
If you check the map of the TIGT and Douglas pipe links, it covers a big section of PRB Converse and Campbell counties - if your hooked into this your gas goes to them to process, sell on and bullets back - if your not then its higher cost and hassle so unlikely - all producers in area must go through the Douglas plant and Tallgrass and COPL are in a prime position -opens options for partnering aswell if his secured bullet supply is higher than requirements, but key is he doesnt have this constraint capping any COPL development plans.
As an aside and minor point, AM has mentioned butane/gas for the MF bullets prices twice now in recent interviews, he hedged it so has a good deal since it has doubled in price.
To me on first evaluation it doesnt warrant such attention - yet he circles back there - he has talked more about that in total then the Fed Deep discovery! so why?
He doesnt mention the plant he paid $1.5m to expand to gain the MF bullets constant supply for his operations - it should be online now or soon. I think he has hedged for a good price, secured a supply before opposition in the hot PRB , knows increased MF works wildly better than expectations , combined its a coup to get this position and he is very happy about it - more news on this in due course perhaps.
Thanks Illusion, I hope they contact me aswell :) they are doing II roadshow, more interviews which is encouraging, perhaps the other marketing will catch up, but some quick wins being missed imo.
Agree 100% - 20,000 bopd is viable
The oil in place reserves forecast estimate we have is the Ryder Scott report, updated in April - this is conservative, assumes 10% recovery rate, MF can provide 50%. Equally we have much higher pressures than assumed, adding to extraction rate per day.
So the CC oil in place reserves assumed of 12 million barrels P2 from 117m OIP then become 60m barrels P2 - double gross P2 reserves assumed at this time if gained.
Thats just CC - whose production estimated in Feb presentation was a very conservative 3,500 bopd plateau, taking 5 years to get to that level - (defined by drilling)
Slide 16 shows combined CC and BFU production at 7,000 sustained by 2026 assumed by RS.
BFU production therefore would be 4,500 bopd of the 7000bopd in this RS scenario
Yet BFU production remodelled by COPL in Jan 2021 shows it reaching 8000 bopd alone by Jul 2022 with MF, then stablisising at 6000 by 2026 (slide 17)
These are all pre MF metrics on both reserves and production expected for CC and BFU - due to be updated and may indeed surprise.
This also doesnt include production from CC well recompletion
Production with better MF (30% more than predicted?)
Enhanced drilling in BFU Shannon - another 20 drills planned
May gain 10,000 bopd alone - before lower level upside exploration
CC may gain 5,000 bopd - but upside may be a lot more, defined by drill campaign - also lower levels to be developed
Fed Deep - deeper levels 100% COPL owned - COPL are operator and decide
Not included in any reserves analysis or production by RS or Southwestern
Assume 5000 bopd once some horizontal drilling complete, but could be much more - other Frontier reservoir drills are coming in at range 1000 - 4000 bopd - per well.
Wyoming alone in 3 years - 20,000 bopd is viable - with further upside present.
Could be a lot more, earlier if further funding enabled, revenue re invested, WI gained etc.
Nigeria is the wild card - add that revenue on a strike and Wyoming development is fast tracked.
Two drill permits outstanding for approval in Fed Deep - expire in May 2022.
AM went for the last Fed Deep drill as it was expiring and made a discovery, likely to go for these aswell in period.
Good to know more about the requirement to drill in 4 adjacent sections following the fed deep discovery - in fact all about fed deep - what reservoirs found in the 6 horizons, what scale expected, what next.
AM not so good on comms in the past as not much to say, waiting on Nigeria etc (perhaps some news soon finally?)
Now so much to say, emphasise and we are rationed still.
Noticed the LSE banner at top of page for companies doing interviews/answering questions raised - hopefully AM may consider going forward for COPL
"If you have any questions that you would like to ask Zephyr Energy, SpectrumX, Scirocco Energy and MetalNRG please submit here."
Interesting interview - and its timing.
HFB called it last week (welcome back) it looks like its clearing and normal trading may resume - AM obviously came to the same conclusion, as kept his power dry until today to give an update and commented on the trading shenanigan's at some length.
He emphasised that he has been running a listed company for 30 years and gets all the market trading dynamics, summarised that many PI understand what is really happening, have no concerns and so longer hold, some may not fully understand and sell as they see the SP down at this level, so encouraging other sells etc.
Then onto fundamentals which are way beyond even COPL expectations - he called this a transformational deal back in March - what superlative is beyond that?
Key message for me was has been doing a virtual roadshow with real II to explain the company position - some recent huge buys of range £200k - £500k may be the result over the period.
SP held down to accommodate? who knows, but the more II that join with longer term horizons than 0.4p the better, happy to wait down here for them for this to then reach its true value.
Even on conservative assumptions, this has broken all relist price rationale commentary and will now come post churn.
It also shows he didnt want to announce this before he feels we are on a turn, explains the lack of a massive marketing drive, new graphs and charts on production etc - but I would hazard they are in the new deck he is showing II and then some.
Then a further focus on Fed Deep and 6 zones testing to decide which to develop.
In summary this is in all likelihood the last time to load at these prices as:
recent trading is not indicative of true value
II are joining
Field development is way ahead of expectations
fed deep importance
Wyoming State Geological survey have completed extensive seismic analysis mapping exercises in the PRB, provide data to interest buyers in quarterly auctions to develop the leases - have pre approved 5000 drills.
No doubt Southwestern have or will do their own further analysis to map the optimum horizontal drill positions and horizons to go for, normally 1 or 2mile, but big associated cost of $6m - $9m per drill.
Interesting to see what he does next - develop Fed Deep, CC or BFU drilling and in what order.
Also more to come perhaps on the high pressures encountered and development of topside to cope with this, increase the production safely . It would be interesting to see exactly what they have done and what this means in production terms of oil and the reinjected gas rate.
The field decline curve graph may be effected by this, perhaps a larger bopd for a longer sustained production period may be possible:
The previous forecast production graph slide 16, Proven and Probable triangle line , shows P2 production stable at around 7000 bopd until 2030, before the decline as the reservoirs are emptied.
Fed Deep drill has established further Shannon reserves potential, to be assigned to BFU.
CC has 117m oil in place reserves estimate, current assumption of just 10% recoverable will increase towards 50% by MF - as being proven right now - the P2 reserves will increase.
Once the graphs are updated with the new MF, pressure and discovery data, increased reserves and production rate then the associated value will be understood - COPL could do this very soon with the data gained this Q.
This SP range bound position all seems planned, and what a campaign so far - they had 6 months to sim and position for every trading move and counter move, squeeze every cent out of this for the inside line, Hadron etc - short term profits locked in at no risk.
Nothing moves this SP during this time - even a discovery in Fed Deep over 6 levels and 246 feet of net sands found was buried in a catch all RNS update instead of highlighted, as if AM knew there was no point in marketing this find in an optimum manner.
We are told constant news flow until Christmas, but frankly whats the point?
- Increase MF effect by another 30% performance, achieve 5000 bopd by December
- Gain CUDA Wi in a resolution of debt and the calculated fair deal price of $11m on top to secure, this from funds in the bank
- Gain CNOOC WI using the $20m accordian facility
- Re negotiate the debt on better/longer terms
- Bid for and gain further leases in Wyoming
- Establish Fed Deep reserves at another 20m barrels P2
- Do a JV with Exxon for topside expansion and joint exploration of contiguous Fed Deep reservoirs spanning their adjacent license areas
- Do a deal with drilling company used on Fed Deep for a share of the discovery to minimise horizontal drill costs expenditure in early years
- Expand BFU and CC by MF and further drilling - increase P2 reserves by a further 20m barrels
- Secure a massive find in Nigeria with a 15,000 bopd share gained
- Complete a huge share buyback scheme
- Pay dividends
And the SP could still be at 0.35p
That's the way it goes, but don't forget, it goes the other way too.
Charlie had a range of future SP potential based on sourced data and reasonable range for PE/ratio averages, WTI price, assumptions on lifting costs, bopd amounts etc - he even posted his file workings.
May need an update soon Charlie.
"Your only supposed to blow the blo*dy doors off"
starvest your right - 300 pages is some document, loads of great info there, but needs an executive summary for best marketing - then a presentation of the key points explained with multiple graphs and projections.
I think AM has forgotten shareholders for the moment and down playing his newsflow - just focusing on the operations and business, he should throw the market a bone - its such a quick win to do so.