Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
1 - production rise into profit 100% confirmed - end Sept or Oct prod update may confirm
2 - Debt Managed - $8m on account, RBL possible once proof of concept and reserves valuable for on sale and leverage - at any time following proof of concept
3 - Joint Venture with a large Oil Company - LOI 2 months - usually sign that broad agreement reached and final legals being confirmed - at any time
SP is held until confirmation of above - as market does not assign potential to COPL valuation - but once confirmed .....
Costs from last Quarter financials:
c $500k - $1m per month SL capital repayment - was at $37m end June - constant
$400k p/m SL interest - reducing as capital paid off
$400k p/m O&A - reducing
$300k p/m butane/condensate - increasing
$400k p/m - field work/maintenance/parts/consultants etc - variable/to suit
c $2.4m breakeven - with the additive gas flood increasing production over time
Agree with Bob, think Cowan is an interim - no sign of him yet so no great revolutionary arrival, outline of his plans as you would normally expect within days - certainly no more than a week for a CEO appointment in most industry - the few sentence quotes in a huge RNA just do not cover this.
SWP are doing well on the field work - could be capitalised on by marketing, drone flight of the field with updated tech commentary of current position useful, as previously by AM daughter.
She could be the next CEO once JV settled, her presentation skills at the flaring hearing were very good indeed, she is trained and capable so not just nepotism, AM isnt going to hand this operation over to anyone - Cowan may retire , appoint her as replacement as last action, looks less obvious this way - this is still AM business in real terms imo.
AM loaned the company money on the past, expect he would have done so again if it had really been a going concern risk, no way would he have let the discovery development be jeopardised for him and his daughter' legacy - as then do what?
"Certainly I see Production rise as key to any route to RBL ie : Secure your current balance sheet"
But RBL banks do not, they secure the loan using the reserves as collateral - the balance sheet is just a result of the proof of concept, abilty to make the field pay - as stated, the capital and interest payback is offset for as long as COPL determine , so the initial production is not pertinent, nor is my guess of what the prod may be by Jan - these are your self imposed milestones, so if not hit you can claim some sort of righteous justification - the prod will be what it will be, the key aspect is that is is growing.
Can you try and remember this conversation? as we have had same 3 times now - it doesnt change the RBL position, but I wanted to put you right - again - as some false beliefs need challenge - re your first retort : "We ain’t getting no RBL "
He didnt get RBL before as the prod didnt rise due to pressures, so the reserves he had could not be better leveraged than the SL deal
funds he had serviced debt, CUDA , maybe 2 H wells - not GGS when it was needed
but that was then, now is different due to GGS working and revenue will rise, concept proven, so RBL is viable
The RBL on BFU is independent of the JV - they are on different timelines and without dependency - if JV gained first then better by association with a Major for COPL to gain RBL perhaps.
You said why not lend for the discovery work - it doesnt work like that - as no reserves yet in the discovery for Banks to leverage as collateral - they only leverage reserves, not production revenue as its is the on sale value thats important should the lender default.
Also the payback is offset - only interest and even that can be offset aswell until prod rises then pay back occurs, these are normal revolver RBL terms.
So rather than state no way RBL coming, it is viable and could come any day - neither of us know timing but it cant be discounted.
" Why would they lend it to us when they could lend it to the JV partner whom I hasten to add would not have defaulted and has all the expertise and track record ?"
COPL are getting the RBL - as the criteria for this type of revolver lending agreement is approaching - proof that the BFU field works with its new GGS kit , that the reserves (including CUDA, BFU and CC ) are therefore valuable and can be sold on, so leveraged - its why its called reserve based lending, clues in the name.
The RBL is not for the discovery delineation, the JVP already have their own lending agreements and funds in place - its not an either/ or Bank lending decision , that vacuous argument holds zero water.
SL debt = $37m from end June
Even with pressures capped production to date - this debt capital and interest has been serviced, penalty's paid when difficult to comply.
With production scale up and proof of concept its not a large debt to carry in real terms for the scale of profit thats going to be coming per month, unhedged rising prod towards the 5000 bpd plateau - the prod at end of Sept indicative of the trajectory towards that.
As soon as viable and coming soon, RBL will pay the SL off , debt becomes the far more manageable revolver as is industry standard - vast majority of mid caps and Majors retain RBL agreements for debt to pay for works/acquisitions which is then paid back over time.
E.g - last M & A news as Stas posted -
"The deal will be funded with cash on hand and borrowings under Western Midstream’s revolving credit facility. "
Debt when managed is a useful tool and standard approach, when its not managed it becomes toxic, death spiral finance the only recourse for a temporary respite- but COPL are through that period now, with BH assistance - revenue is going to increase substantially.
JV signing fee for a % of Working interest may well be coming, it has been the case for similar deals completed between minnows and Majors. If COPL managed to drill the two confidential H wells noted in permitting on WOGCC with their own funds then adds considerable value and opportunity for an early deal stage lump sum - if not then in time probable as WI is sold as the field is delineated in stages.
Debt has to be evaluated in context, opportunity to manage and repay identified and understood.
As soon as the JV signed the naysayers should move on - as by then the JVP will determine news flow, all COPL need do is bank the prod revenue from each delineation well brought on line, 150 are required to fully exploit the field at 1000-3000 bpd each well viable with full tertiary recovery - which is planned from the offset.
The top three players in PRB each drilled over 50 wells last year.
Exxon were not one of them via their subsidiary XTO, but have capacity and the appetite to do so based on their positioning in the PRB, Denbury acquisition , Co2 storage infrastructure.
Thanks Stas
All the M&A shows Wyoming PRB is the place to be - for drilling permit authorisation, constantly low tax reassurance, reasonable enviro regs, good local relations and pro HC legislature = Governor and Senator support and Federal oversite managed through lobbying by Majors, protects and encourages their long investment, with a carbon capture theme to offset and gain further tax breaks throughout.
The COPL discovery ticks every single box, biggest onshore USA find in decades, with the 10 mile long Cole creek anticline for co2 storage, topside, infrastructure and wind farm in place.
Its a new description just from April 3rd onwards - not that old
They would have had the two confidential H drill results by then.
I cannot recall seeing this mentioned as an asset previously in any finals - if so however what is its scale?
this was their sign off as of January 2023
"COPL is an international oil and gas exploration, development and production company actively pursuing opportunities in the United States with operations in Converse and Natrona Counties Wyoming, and in sub-Saharan Africa through its ShoreCan joint venture company in Nigeria, and independently in other countries."
the first new description was in April 3rd RNA
"COPL is an international oil and gas exploration, development and production company actively pursuing opportunities in the United States with operations in Wyoming.
The Company operates three Units: Cole Creek 100% WI, Barron Flats Shannon (Miscible) 85% WI and the Barron Flats Federal (Deep) 85% WI in addition to non-unitized lands 100% WI."
LM
Agreed, seems strange, but fact remains there is an LOI in place and with COPL favourite partner as maintained.
Plural third parties could be bringing in CNOOC - 15% of Fed Deep formalised drill cost sharing in an enhanced agreement between them and COPL - if JVP pays for drilling, CNOOC have to pay their WI proportion via COPL presumably.
If 50 drills at c$5m each then $38m to them, peanuts to a Major - but agreement/legals still needed.
Equally, statement at the end:
"The Company operates the Cole Creek Unit 100% WI, Barron Flats Shannon (Miscible) Unit 85% WI and holds Barron Flats Federal (Deep) 85% WI in addition to non-unitized lands 100% WI."
so whats the non-unitized lands 100% WI. asset as not seen this before - new lease hold bought based on their tech evaluation? perhaps also being marketed - all drill results NDA covers them for well interpretation by others, better ID of analogous plays in the area.
Richardson
"The Company now has a focussed executive team and Board aligned in their focus on delivering value for all stakeholders. We are delighted with the belief and wholly aligned support of our two most significant capital providers in the changes we are effecting."
Anavio are one capital provider, who is the other one ?
Cowan
"....ensuring that if the interest being shown by certain third parties in joint venturing with us matches our own views on value, we will seek to further scale through partnership."
third parties plural - either more than one JV deal being considered for the assets, or multiple bidders for Cole Creek/FD?
Tuvok
a promotion, heady stuff
on the fundamentals ,absolutely , on business approach, not at all
Yep im pretty frustrated as are we all, have banged on about poor comms in the past, such as easy fix - just employ someone conversant with modern marketing and presentations skills within the company to replace Cathy and let them get on with it, $70k would do it by pay cut from the CEO/CFO on their exorbitant salary.
Not sure on how to read the reshuffle overall, RBM may well be right and its JVP instruct, or AM suggested it to them and they agreed, as he does need to focus on the JV and its delineation now BFU seems to be working well and on track - we just need confirmation of prod rise following increased MF rate, perhaps in 3 weeks an update may be coming.
Cowan made his opening statement in the RNA, in COPL standard communications terms, job done for a while.
Assume no interview and just essential RNA going forward in the same style to date - dump multiple news items in one massive complex and convoluted RNA - ignore the opportunity to release good news in smaller focused multiple RNA, or release bad news then swiftly followed by good -its information in their control - not all this happened on one day, they could have released as separates to far better effect and momentum driven - finish with a JV focused update and remain upbeat - but such easy wins are totally lost on this company.
As he has worked for AM for years I expect he wont rock the boat, we wont get any radical re haul on comms, or website (which is out of date, incomplete, amateur looking not befitting current status) -
In essence AM probably still making all the key decisions and Cowan just the messenger as its obvious Art doesnt delegate or allow others to have real power, regardless of their title - look at the last webinar with Ryan - AM pretty much answered everything for him on finance - only asking Ryans opinion once, then answering for him "Am I right Ryan? , yes I think I am"
Read certain republics leaders changing from President to Prime Minister roles and back again to give the appearance of democracy, whilst retaining all power regardless of title.
I do get the dynamic and need for single vision however, if we get the JV and mcap rise so be it , I think we will so the end may justify the means (somewhat).
IMO the move to President of COPL America was at AM suggestion - so he can focus on the JV and reduce his stress levels, Cowan can focus on day to day admin and be front of house, take the flack from shareholders irate at the abysmal SP, poor comms and general lack of progress evidenced to date on production following GGS and JV completion after a year of discussions.
The Cole Creek /Fed Deep field work will be led by JVP.
AM and tech team will be involved for sure but he isnt driving investment, drill strategy, financial deals post JV - as expected the JVP pays for all or vast majority - they wont hang around until COPL save their pennies to fully exploit the 50 -150 well field.
The BFU is soon to be in profit, can they pay for its own development going forward as funds allow - self sustaining and minimised risk - they have $8m in the bank now so all going concern issues put to bed as enough to transition through the GGS growth phases and prod/revenue to rise over time, service debt and get into the black in time.
Transition from minnow to mid cap reasonably assured now.
"Mr Cowan will be focused on overseeing the Company's administration and the development of the Barron Flats Unit Miscible Flood."
So Cole Creek part of JV confirmed - its development to be led by the JVP, Cowan looks after the BFU cash cow and pays the bills.
The Bonds were necessary to reach this point, without them COPL would have gone under and all PI investments would be lost.
The alternative was a bridge loan one off - with debt to service they could not, so defaulted.
Other than that - direct raise and dilution which on reflection may have been better overall or in concert with BH to limit dilution.
BH total shares is the high price, but that just the logistics of getting to this point - what is far more important is that COPL have a JV coming with a Major, are fully funded and with a re calibrated market facing structure and focus, hedge offset and profit territory coming soon, with associated debt risk reduction and re finance by RBL viable using CUDA and CC reserves leverage.
Some will ignore all these strategic positives as its in their interest to bang on about the Bonds , not much else they can focus on - as today was an exceptional re calibration RNS.
Objectively, this looks like the outcome of a series of full day workshops between COPL, JVP and Anavio to best align all interests before the next pivotal stages of prod rise into profit, JV confirmed and field delineation commencement.
Basically , position the owner COPL to best align for its new Major partner, the JVP to create a suitable position for them to JV with confidence, a push for stability and no nonsense professionalism befitting a Majors involvement., the financial backer to position for its future best gain and control the wayward comms/going concern messages -all goals appear to be symbiotic.
Art got what he wanted - involvement in the discovery delineation in partnership with JVP tech team, and its sale by stages, step back from caustic front of house position with shareholders and focus on his skills, with overall far less stress.
JVP got what they wanted -rebranding for their partner to remove past connotations, a partner with a solid production base and funded well into JV operating ( I expect they wanted evidence of funds to last for a quarter of JV in place, so personally expect it in Q4) , control over the field works with a clear strategy.
Anavio got what they wanted - stability induced for their considerable investment to date to bring COPL to this point, with an enhanced partnering position calling more of the shots to best gain from the eventual sale of asset - as part of this they are looking to re work all bonds to allow SP gain and reduce loss of momentum seen from small bond sales, allow mcap and sentiment growth - they invested for the delineated discovery sale and its dividend/payout, they always were.
Onwards.