Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
WBH,
Also posted this as follow up Sep 22nd on COPL intent to drill at least.
At the time it looked positive to me., hope this may assist in your case to find out well status.
"Phase A of discovery delineation in previous presentation August 2022 was for 6 drills
https://www.canoverseas.com/wp-content/uploads/2022/08/COPL_August_2022_Investor_Presentation_Final_080822.pdf
slide 9, red stars marked
Deep well locations A (permitting now)
confidential wells permitted and intended to be drilled in Jan/Feb this year were
BFDU 42-19-3576FH - Frontier 1
BFDU 41-30-3576FH - Frontier 2
They may well have been drilled, the presentation states the plan , 50% of the casing was already bought by Aug 2022 - which means intent and presumed ability to pay for a drilling contractor must have been viable - these wells were exactly as stated targeting Frontier 1 and 2, slide 16
"COPL has been able to secure 50% of the casing required to drill the first two horizontal wells.
– There is a current global shortage of oil field tubulars (casing) due to the Ukrainian conflict.
– Casing prices have increased >50% with all grades in short supply
– Production tubing prices have increased by >30%
• COPL’s Southwestern Unit has identified a drilling rig to conduct the operation.
Contracting the rig will occur once there is certainty around casing supply"
WBH
I posted this Aug 1st:
Http://pipeline.wyo.gov/OperatorsFrame.cfm?Oops=1
Select southwestern production corporation
select current wells
then at bottom WC, select display wells
shows there are two confidential wells logged on WOGCC
They were not RNA as must be subject to NDA in the Joint venture discussions.
click on
49-009-49002
BFDU 41-30-3576FH
Horizontal well drilled in the Fed Deep targeting Frontier 2 - confidential well status confirmed Dec 20th 2022
click on view APD and it downloads a well status file:
"Southwestern Production Corp proposes to drill a pilot hole to 9,079' TVD in the Frontier formation, then kick off horizontally to 8,961' TVD/11,053' MD to test the Frontier 2 D Sand formation"
Anticipated spud date was Jan 8th 2023
So unknown well result - or who paid for it.
Then back out of this and select 49-009-49001
BFDU 42-19-3576FH
Another Horizontal well with confidential status
This time targeting the Frontier 1 formation , anticipated spud date was Feb 8th 2023 but may have been delayed due to weather, equally confidential status granted May 1st 2023
"Southwestern Production Corp proposes to drill a well to 9026 TVD/ 11,118 MD to test the Frontier 1 B formation."
Again unclear who has paid for it, but assume the JVP or BH as each Horizontal well is around $4m which is way beyond COPL resources.
We do not know if the wells were a success/ or put into production yet and booked production also confidential , but assume they were successful as the JVP was discussing commercial terms as of April 20th when both well results would have been known:
"Discussions with a large oil company who approached the Company regarding the exploitation of its Frontier oil resources are continuing with current focus on commercial terms..... Substantial additional technical evaluation has been undertaken during this period, which has led to a better understanding, and increased confidence, of this resource."
Substantial additional technical evaluation = two Horizontal drill results and evaluation of said data?
Letter of intent had just been signed."
If the Bond finance package was not viable to secure, Empire business case did not pass Bond lending criteria, thenit would have been known weeks ago - its an in depth process of risk analysis / modelling with scenarios of low, mid high production and ROI timeframes - updated by the metallurgical test work extraction feasibility confirmed for maximum silver, gold and copper volumes.
The outcome of this BC should have been positive - now in final board sign off/legals imo - as the principle of the Bond issuance is very likely already established by this in depth investment decision process:
"The relevant documentation relating to the creation of the bonds has now been finalised, the bond security has been recorded with the Custer County Recorder in Challis, Idaho, and the bonds have been deposited with the settlement agent. The issue of the bonds remains subject to the satisfactory conclusion of discussions with interested bond investors."
Unfounded Democratic bias group attack on DEC approach, easily refuted with the evidence base could be ammo for Republicans in response - DEC are actually optimum in approach to emissions, abide by all best practise and an example of how to operate if its accepted that nat gas is a required resource to keep the lights on - seems like a good opportunity for CEO to discuss with his Congressman., win win for both as exposes Dems naivety and error, outlines Republican pragmatism and reality basis and appeals to swing vote on logic, DEC gainthe positive PR.
Strategic positives:
"The critical part of the Empire Open-Pit PFS process has been to test the viability of a variety of mining and processing options"
"the metallurgical test work and process design engineering completed to date as part of the PFS, indicates that oxide flotation + tank leach tails processing will provide the most optimal results...... Additionally, laboratory checks and some final grinding studies, rougher/cleaner flotation testing, and leach tails analysis are in process in the laboratory"
This process anticipated for completion during Q1 2024
PFS following this by early Q2 2024:
"The final PFS report will include a comprehensive mine plan, mineral processing design, compliant mineral reserves calculated as deliverable metal for smelting or refining, net of mining dilution, detailed operating and capital cost estimates, and final economic analysis and cashflow"
Reducing opex and increasing revenue possible is good enough for me.
When AM made lead for JV discussions he would have negotiated
JVP would make an outrageous opening offer - Am rejects as standard, assuming they would come back with a more reasonable one and so it would play until deal done.
Anavio however, may have seen the scale of the initial offer and what would play and started this asset grab process - reject the counter offer and walk then work the ownership, to then come back to the table in due course as a private owner.
How does the SL view this? as long as they are presented with a way to get their money back, they could be an ally.
I thought their financial deal terms in Oct were very generous on hedge offset etc , they awaited JV outcome as did all - so if Anavio scuppered the deal as this scenario, could SL consider waiting longer and support if given an alternate position which adds far more value. - In asset sale FD is worthless as has no reserves, only potential - do all COPL and RS reports go to bidders?
Anavio saw what could be and sidelined him, ended the discussions
RBN
some points I hope may be in consideration
SL have placed these two.
Website updated - executive management , Chairman Richardson now not listed, funnily enough, but would still sit on the board for votes.
https://www.canoverseas.com/about-us/
Cowan replaced by Kravitiz = SL appointee - interim term pending another real CEO with vision or just for the wind down period?
CFO Gaffney - allegiance? will probably vote for best outcome for him personally
Rod Christensen - Southwestern - will vote for whomever will pay the wages
Richardson - Anavio
So in a board vote - SL has 1, Anavio 1 and two floaters who may vote in their self interest
SL appears to just want to wind it down, gain their loan back as best they can
Anavio - dump as many shares as possible until close? but no way they make all their investment back - but who will buy once all last vestiges of hope gone?
Neither leads shareholders interested in COPL as a going concern and therefore not SH aligned = enough cause for an EGM?
Gaffney and Christensen votes count however - influence them and possibilities emerge.
Here in lies the rub:
"COPL denies any speculation that there were any efforts by the Board to depress the value of COPL's assets and undermine production efforts for the benefit of Anavio or anyone else.
The Board members had no reason or incentive to act in such a way and in fact, and have recently retained a third party expert to evaluate field performance and development options going forward as well as financial advisors and a restructuring specialist all with a view to maximizing value for all stakeholders including COPL's shareholders and all with the approval of the senior lender. "
If the third party expert to evaluate field performance and development options can confirm the field can be developed, given finance, then the reserves has value as can be extracted economically - so sold for fairer value in asset sale - otherwise max possible 1100 bpd max and big investment required and they may not get any bids - FD aside.
If technical review a success (and why not, it flowed 2700 bpd previously) SL get pay back of most/all, Anavio the remainder left over (and make hay with confetti sales in the interim)
SH of course get nothing - unless the proof of a technical way through enables a counter offer/position.
If the company had any intent to continue, they would have protested the end of the JV discussions and outlined details of why the JVP had made a wrong decision, stated aims to market with other interested party - they did not as want to force fire sale, JV is a maverick aspect they wanted to keep quit - note the paid Trolls strident advocacy in this regard - "the discovery and JV discussions were all made up , should be ignored as ramper fantasy"
15 months and LOI however imply otherwise.
Whilst very positive strategically, it was a filler update, could have been issued at any time, notable by lack of news on the finance, due Jan 2nd - mistake to issue this imo without recalibrating bond timescale, or it they cant do that, their confidant expectations re iterated.
Silence on bond is ambivalent, if I read between the lines they are going ahead with mine planning, all in the expectation of funding being in place, the entreaty to patience and longer time frames also telling.
I expect CEO is wary of specifying yet another bond deadline and missing it - sign off not in their control however.
Overall conclusion imo, bond discussions continue, no blockers expected as case is well made, final legals perhaps - but patience required, all is on track as to their plan and they are active in its development, extended planning time is rarely wasted time.
As outlined, DEC have survived wars,, inflation, energy price fluctuation, covid, etc.
Build out of US electricity production capability and reshoring industry plus increased LNG exports = greater use of nat gas
They are likely to grow stronger over time, SP fluctuations aside - MM do feel obliged to make a market - but overall impact to the dividend scale and prospects/fundamentals is broadly unchanged, just SP if sold today - but why sell?
growth and Income ETF are always options if more surety needed.
Great points Stan,
Do we know the plans for the spend of Bond scale from $80m - $300m cap?
Is this wider portfolio of exploration/cobalt etc in the area ?
If so then supports your points made very well - also strong partnership/symbiotic enabled.
BB can be great for sharing understanding, Im hopeful for the next stage here.
The lender will have taken into account the following in their lending decision:
• Phoenix board and their own investment in the company and project success
• Phoenix team have global extensive experience in mine engineering, environmental permitting – project delivery
• Team has banking and finance expertise – know lending criteria and positioned
• Low shares in issue
• Strategic planning evident for use of the $80m funds, build on success
• Early ROI potential for lender
• Empire mine established for decades –not wildcat exploration and drilling
• Only 1% of Empire has been developed – substantial upside
• Exposure to Copper, Gold, Silver in mine development – reduced risk in commodity prices
• Low-cost, low-carbon footprint production approach - good optics for lender
• Copper supports electrification tech and power generation - good optics
• In situ resource - 1.36bn, plus $616m Inferred Resource - likely to expand
• Pro mining jurisdiction - Idaho ranked in top 10 mining-friendly jurisdictions in the world
• New Office of Energy & Mineral Resources created within Governor’s office
• Permitting route – concurrent not sequential in Idaho
• Developed local infrastructure
• Need for c ten times current production of copper globally
Equally, encouraging results for ATS leaching feasibility to recover gold, silver, and copper were announced in Sept 4th RNS, but stated required further work by Forte to optimise - this could be a cause for bond delay waiting on these material results - were expected in Q4, with Bond being signed expected same period - recovery potential was good in Sept, the Forte mandate was to optimise - just imo the results of this may take some analysis/ could be better than expected.
"The results of the continuing optimization work are anticipated in Q4 2023."
conclusion - Bond is coming
The optimistic valuations were of course crazy in hindsight, mine included, albeit had basis in benchmarked sales of oil fields and their sale value, believing what the Company had said in RNS - wonderful thing hindsight.
But not many saw this company action coming - from fully funded with shareholder support to end Q1 to this travesty - well done to those that did and got out with some of their shirt.
So if a fire sale in future - and discovery is then developed by a Major (After 15 months of evaluation its still impossible for me to believe the JVP walked, as absolutely nothing there) positive SH would have been right and so not "rampers" after all, but justified?
CASHFLOW
$2.5m funds
$1m is on account
The operating netback was $20.83/bbl - assume 1100 bpd maintained over next 6 weeks = $1m net revenue
= $4.5m to end Feb funds - forbearance agreement with the Senior Lender expires on February 29, but until then assumed they do not need to maintain $1.5m on account
These funds to keep the company liquid in next 6 weeks period
- Board is taking payment in Bonds, other O&M costs were reduced as claimed?
- Southwestern/tech team need paying, but apart from essential field maintenance no other field works known , as Winter conditions/no funds - G&A c $600k in period
- Restructuring team cost - c $3,000 a day per person assuming 4 staff = c $60k per week, over 6 weeks to end Feb = c $300k - a block of financial restructuring /legal work
- "Retain an independent E&P technical consultant in the United States. The consultant is currently evaluating field operations and future development plans." also unknown cost - but assume same fee as financial restructure team - $300k for 6 weeks evaluating the field is also a substantial block of work, enough to identify what is viable to develop the field at high level
- SL interest payments - $800k in period, standard % rate
Costs in period = c$2m
Funds available in period - c $4.5m
Leaving $2.5m at end of Feb, even if you assume double all G&A and Consultant costs (apart from SL interest which is set %) COPL they still have over $1m left on account.
Why not spend it on $1m of NGL as was originally planned?
possible to inject by the GGS being installed - if not possible then the GGS has failed and other solutions are required, unknown by COPL so need the new expects to be brought in to advise -however no point spending a lot on field work feasibility if no funds to prosecute at end Feb - its just staging for whom ever buys the fire sale assets if that occurs.
Multiple scenarios possible, all totally opaque from COPL as always.
One potential outcome could be:
- field solution "identified" in period and works costed by the field experts
- Equity placing to raise funds to prosecute, even greater dilution
- COPL raise production over time and value of reserves for on sale value
- SL extends the repayment terms - paid off over time
- Anavio make money by selling their massive block of shares over time
- JVP may come back to the table or another - or not
Billions of shares, but some potential once all new ownership proportion is fully established at lowest cost to them.
If COPL can remain in business and retain control of the discovery for development - there may be a chance of an eventual return, albeit diluted massively, but a chance is still a chance.
Trump likely win latest poll
https://www.youtube.com/watch?v=9_Fkq3mi4gk
"Drill baby drill" - Trump pro energy day 1 agenda
https://www.youtube.com/watch?v=kfld6F2WVOA
Incentivised energy industry encourages investment, asset portfolio development and focus, faster field depletion and sale once fields nearing life expired - DEC business model is proven.
Further point on the confidential H wells results:
If success - then no news
if failure - then no news
confidentiality protected the JVP interests and was appropriate due to ongoing talks to secure JV.
Fact remains they remained in talks for a further 11 months and signed an LOI - so what drill result is more likely for proof of concept?
But now - no JVP- so COPL could come clean and say what the confidential drill results were or at least be asked by RMP group, they are on WOGCC so cant be denied occuring.
COPL - if they had any interest to remain in business - may invite other partners in to get over their current finance issues - in return partner secures the discovery.
A fire sale is open to all bidders - given the focus, Governor statements in the press etc, spending around $50m to see what the FD has that interested a peer for 15 months is worth considering as a punt for a Major, they could even sort the BFU field out with their resources and get ROI.
If the goal was to drive the current shareholders out, towards fires sale and taken private then its a future text book example of how this can be done - but its not over yet.
ASSETS
BFU field that produced 2700 bpd with plastic pipes as logged on WOGCC (so this did occur) - yet struggles to get above 1100 bpd with steel? - 40m barrel reserves, incline curve .
Fed Deep - between 1-2 Billion barrels, according to COPL and RS (who only assessed part of the field).
The JVP - if there was one? all NDA and confidential , analysed it for 15 months we are told, Frontier 1 flows as proven in CC well recompletions, following which two confidential wells were drilled - this is where COPL money went imo, aswell as for BFU field problems - their existence as drilled wells - critically not Plugged and Abandoned status - is also listed on the WOGCC.
It then plays in this alleged scenario to not put these two confidential wells into production in Jan/Feb when they were completed - instead - COPL issue the going concern RNS and SH get the SP reduction journey since.
An interested party could then buy the fire sale assets for a song - as it "appears" the MF does not work and only 1100 bpd possible,c reserves have much lower perceived sale value in this engineered? fire sale "marketing" position - substantially lower than all debt - perhaps not even covering off the SL - no current stakeholder or SH wins - except the fire sale asset buyers.
FD still has no sale value as when COPL bought Atomic , its just BFU reserves, which just comes with the FD lease - they then get all the FD potential for nothing, instead of paying the going market rate for delineated reserves and WI % as field delineated in stages.
If this scenario holds any water, then the current spotlight could prove uncomfortable, may indeed be forcing or influencing a change to the planned end game.
The last rushed "come clean" convoluted RNS would not have been issued at all imo if not for RMP group activity , so thanks due to RMP et al, other outcomes may be possible.
AM probably does believe in the asset.
One scenario could be that he loans the company money to get past current SL reqs without further dilution, he kept COPL afloat in the past with a loan - then injects NGL, name change, consolidation and they remain in business to develop the discovery on their own or in partnership with another in due course - it may be his best option.
"COPL...have recently retained a third party expert to evaluate field performance and development options going forward "
Recently = when JVP walked and they couldnt offset this decision any longer?
Its tied into where on earth did all the money go?
The accounts submitted are comprehensive and auditable to Canadian onerous standards, "Board offshore accounts" isnt a line item - the cash flow should in theory be transparent
So where has the money gone?
Line items such as third party contractors? certain unsecured creditors?
Despite egregious behaviour in so many respects I cannot yet believe simple larceny, the cash in all probability went in some form to advance the Company, even if it was incredibly poorly managed.
They faced back to back field problems throughout, serious fires at well heads were not reported by RNS, just on SEDAR comprehensive documentation months after the event.
So if they have had issues with the GGS which required massive funds to address, its not going to be known for months - fact remains, those funds, if deployed on the field, have not assisted in raising production to date - either by lack of tech knowledge in approach, insurmountable constraints to date or otherwise.
The Third party engineering consultant may well be the last shred of a chance for COPL to remain in business in some form, timeframe until Feb 29th for his report - following which SL decidess on approach.
However - as lamentable as it may be, COPL have reached out in the last line of the RNS for alternate consideration, which means inside line for any HNWI who may inquire:
"The Board is also exploring ways to allow shareholders and other investors the chance to participate in an equity placing."
1 Billion barrels at stake, games are afoot.
GLA
Ive written off my investment, what a complete shambles.
COPL, SL and Anavio were all relying on the JV happening, all debt repayment, hedge restructure and timeframes predicated on it landing in Q1 - with this Major backer COPL would have guaranteed income as a % of the wells that came on line, debt repayments could remain offset over time - the Bonds restructuring to reapayment 2029 indicative.
But then the JVP walked for whatever reason after 15 months of evaluation and the whole debt house of cards collapsed.
That could have been overcome if COPL had managed to get the GGS to work, carried out the NGL injectant work as they stated they would in Q4 - silence on this indicative of deeper technical problems perhaps beyond Southwestern capabilities, calling for at the last the services of " an independent engineering consulting firm designed to give COPL an opportunity to become more viable over time"
Ignoring all the sorry history in the RNS , this is the stated plan:
"COPL...have recently retained a third party expert to evaluate field performance and development options going forward as well as financial advisors and a restructuring specialist all with a view to maximizing value for all stakeholders including COPL's shareholders and all with the approval of the senior lender."
Because not all debts can be covered by fire sale, if the third party expert comes up with a plan , costs it and the SL and BH buy into it, then it may be worth their while to continue to support COPL, cease asset sale intent, to enable the 2000 bpd and so not only return of all their funding over time viable, but also the opportunity for COPL to go to market for another partner for the discovery.
The JVP left, for reasons unknown, but 15 months of analysis? The discovery must be there or it would have been 15 days - other Majors could still be interested in a deal.
Otherwise firesale for whatever can be gained, losses by the lenders crystalized o, the Fed Deep potential not monetised for the benefit of all stakeholders and SH.
Finance deals and positions can be restructured, standpoints change. If the third party expert can develop a plan to enable 2000 bpd field performance then COPL could continue in theory - which is why im not selling, but as so much at risk, neither am I averaging down.
Each to their own, good luck in your decisions.
Hi Trek
Be good to gain your view on why Phoenix have taken the Bond route instead of partnering of their WI to expedite the Empire mine development - I suppose its an option at any time, the assets are big enough.
Its good they retain control however in many respects, if Phoenix can land the bond then they have upwards of $300m capital to draw down by milestone stages, sufficient for the task.
If the Bond funds arrive and the mine comes through on its promise, this could be a mid cap within 2 years imo.