The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Newtofo/B2B: I learned that UncleBuk had nothing to offer this board. Nowadays he appears as a little green box on my computer. B2B - Let Newtofo and myself know if we miss anything - somehow I highly doubt it!! Maybe if more people would ignore him he will just fade away. The filter button for invented for him.
Smallfish: I agree with your reserve classification comments. I was not making reference to 2C reserves - I think I mentioned "contingent" and gave reference to the Amungee and its 1998 sq km surrounding acreage that was assigned contingent resources of 6.64 TCF.. We are talking apples to oranges. I took you comments to mean Falcon wouldn't benefit from any production unit unless they participated in the drilling of those production units. I'm saying that any production proved up in a 10 sq mile area can certainly be recognized across the boundary of that particular unit. If Falcon can benefit from large blocks of land carried at a higher price per acre based on even contingent resources that will translate to a higher stock price on land valuation alone.
I am not a PE and can't comment on what may or may not be classified as 2P or 3P reserves based on distance, pipeline access, etc. With that said, and as I believe you also mentioned, to a degree the 2c & 3C reserve classification will extend beyond a production unit boundaries. Between those bleed over reserves, contingent resources, etc. Falcon could benefit from completely standing on the sideline the next 3-4 years. POQ has already made it clear Falcon will be participating in drilling but not to the proposed 22,5% participation of 300 - 500 wells that Tamboran has estimated will be drilled on the Beetaloo in the next 3-5 years.
Some on this board may not understand the extent of the Velkerri formation across the Beetaloo - Yes there will be 'sweet spots' and some lower quality sections but overall the table-top Velkerri formation that lies across our acreage will likely produce similar returns. There is a hell of a lot of acreage to be drilled that will take decades to fully develop. I believe Falcon is sitting in the cat bird's seat to drill what they can afford to drill as raises/production permits. In three - four years there will have a suitor come knocking to acquire Falcon's interest at what is hopefully a price that will make all of us smile.
Oh by the way, that Velkerri formation also contains A & C shales that will be explored in time. The B & C shales were practically a toss-up in the Amungee area as to which to develop first. Falcon's geologist said the C shale has a few more rock structures which gave the B shale the advantage but the C shale holds vast gas in place available for future production. All is good IMO.
Oleo - "Did Philip really think he could have put together a deal in 30 days? "
You would have to ask Philip that question. I believe he quite possibly could have raised the money but then, IMO, that was only half the battle - Falcon had to end up with a partner that was an E&P company and met the approval of the Aussie government.
I always felt this would have literally been pulling a rabbit out of his hat if he accomplished everything in 30 day but what if he had talked to say Santos and they were all in - then BINGO the money is raised and being an Aussie company they would have likely met the approval requirements. The 30 days was to exercise Falcon's ROFR - after that he would have had an undisclosed amount of time to finalize a deal. So was I planning on all that happening - certainly not but there was a slim possibility.
Oleo: There are a lot of assumptions in your answer regarding your proposed shareholder vote. We don't fully understand what POQ was or was not made privy to prior to this Tamboran deal - your assumption is that he was made aware of these details months before. From what I understand, POQ knew that Origin was negotiating with various parties (Tamboran included) regarding a farm-down - not a fire sale. He was not made aware of any discussions/details of those fire sale negotiations. I can tell you that Philip personally considered this a slap in the face that Falcon was not included in these talks. If Philiip didn't know the extent of the farm-down talks, which ended up in being not a farm-down but complete exit by Origin, then how would he have put together a timely vote by the Falcon shareholders - just what would he have told his shareholders they would be voting on?
Once again - that's why these public companies have board of directors.
Oleo: I had to laugh at your proposal that the Falcon shareholder's should have had a chance to vote as to which option to pursue. POQ had 30 days max to organize/hold that vote (an impossibility in itself) and then pursue the outcome of that vote. That doesn't include the fact that running an oil company business totally by democratic votes is not a way to run a railroad - that's why companies have boards. Join the real world guy.
Smallfish: I don't believe you understand the consistency/extent of these table-top shale formations. These shale formation production potentials don't vary significantly from one location (pad) to adjacent areas. If these next two Amungee wells prove to be 'commercial' it is said they can help prove up the acreage between those two wells and the Tamboran wells some 30-40(?) km to the west - that is IF the Tamboran wells are commercial wells .
The seismic along with Falcon's test wells on the Beetaloo indicate that the Velkerri formation has an aerial extent covering 95% of our 4.6 million acres concession. Regarding this aerial extent concept - look at the original Amungee discovery well and the 6.4 TCF of 'contingent' reserves assigned to that massive block surrounding that one well and the higher land values being assigned to that acreage. Shale formations are blind to the arbitrary 6400 acre production units formed - many of those wells will be designed to have horizontal bores extending to within 100 yards to the boundary edge of their unit. Cross that boundary and guess what - the same shale potential still exist.
Are you trying to gaslight us that IF these next two Amungee wells are commercially successful (which most fully expect) that only the 6400 acres included in their arbitrary 10 sq mile block will be counted into reserves? Falcon owns 22.5% of the acreage surrounding these tiny 10 sq mile blocks - the acreage extending beyond the production unit WILL carry higher values and benefit both Tamboran and Falcon - even though Falcon might not have participated in the drilling - Flashing Alert smallfish - Not every acre in the Beetaloo will have to neatly fit into a production unit prior to those acres carrying a higher land values for potential reserves/commerciality.
As to gas outside your the production area - Falcon will not be stepping out on its own and drilling wells outside the 'exclusion' area (not clear what that means) - Falcon can only participate up to 22.5% so obviously Tamboran will be drilling those units and they have a contract to sell their gas to Origin - I suspect Origin will also buy Falcon's undivided 22.5% of that gas production.
As to your post I disagree - there are in fact fools.
Oleo: "Anyway you can expect this will become a boring forum and we will see a depressed share price as long as we will not get any real good well test production data. But POQ prepared us already today that we will have to wait till 2023/24".
How can this board become boring when we have you to enlighten/entertain us. Maybe you should go hide in your hole until 2024 - sounds like you won't miss anything around here and I suspect not many will miss you. :^)
Longknife - You forget who was driving the timeline the last 12-15 months. I suspect you are going to see a much more aggressive/vocal Tamboran B2 going forward. It has been stated that the next two wells will begin by the end of October. I suspect the drilling/fracking will be close to if not completed by year-end. We will likely get an IFR on the wells which seems to be standard for Tamboran but as we have been told Origin planned to flow test these wells 180 days - will that 180 days change on these next two wells - we'll see, In the meantime I'm glad that progress seems to be moving forward once again - these next two Amungee wells have certainly tested all our patience.
Frackme: As typical, some can only see as far as the tip of their nose. This deal means nothing to today's market price as most will not understand the potential and the nuances of what it means going forward. This puts Falcon in total control of its destiny. If the Beetaloo proves up to be the World Class Discovery that we anticipate then to quote nevesofsteel - "All is right in the world".
Newtofo; Frackme; BtoB: Wow! - I woke up this morning to an absolutely brilliant deal that POQ put together for Falcon. I am still digesting the details and thinking my way through this but I have to agree that this appears to be even a sweeter deal long term than the original Origin deal. In reading through your posts - I think you have captured the essence of the LOI - no need for me to restate it. Great job!
When one looks at all the options this gives Falcon, its hard to get one's mind around all the potential ways the game can be played going forward. Falcon just moved from the back of the bus to actually being in the driver of our destiny.
I have been pushing for Falcon to adopt the US Texaco model of checkerboarding the development of acreage across the Beetaloo - let others take the risk and then step in and participate in what is basically infield drilling. While that is not the exact model Falcon/Tamboran has adopted, it achieves the same goals but more importantly gives Falcon a multitude of options to participate at the full 22.5% all the way down to sitting on the sidelines and letting others prove up acreage.
Tamboran has mentioned bringing in a multiple partners to help drill 100s of wells in the Beetaloo. One of the beauties of this deal is that the operating agreement covers all 4.6 million acres of the concession. So, as an example, COP comes in as a partner they might be assigned a 200,000 acre block. On COP's block, Falcon has the same options as to what level of participation they elect. The real benefit of all this is that as the "Tamborans/COPs of the Beetaloo" prove up acreage and TCF of gas across the whole of the Beetaloo, Falcon is building up potential reserves. on adjoining acreage to a proved up proration unit. As those reserves build so wil the Falcon stock price.
We are now in the game as long as we wish - at some point a suitor will show up on our doorstep and offer Falcon a nice chunk of change for its 22.5% low ORI acreage. Its all good guys - excuse me while I go out into the market and pick up a few more shares. After these next two/four wells I think its safe to say we are seeing a bottom in our stock price.
The biggest advantage of this whole deal is that it protects Falcon from the likely danger it faced - being forced to raise money when it was not beneficial or timely to do so. As our stock price increase - which it will under this type of development - POQ can raise money on his terms and timetables. We will no longer fear being chocked to death with the potential 100s of wells to be drilled.
Once E&P companies get by the rules requiring SA Blacks be on company boards, employed in technical postitions on drilling rigs, high ORI demands and land appropriation (without compensation) maybe some companies will deal with SA. As the article mentions, SA is a cross between democracy and communism. If SA is going to get this land developed by anyone other than French companies (I recall a treaty being in place with France) then they need to clean up their demands and adopt laws more favorable to these E&P companies.
For those that think the issue with SA is only with our CEO might see there are major hurdles to overcome. IMO, I'm afraid SA is not going to happen anytime soon
Why Expropriate?
The debate over expropriation has much to do with how South Africa’s 1996 post-apartheid constitution treats private property.
Its Bill of Rights references “the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources.” That language embeds specific, historically contingent redistributive aims into its fundamental definition of property.
While the United States Bill of Rights does allow for eminent domain, its Fifth Amendment requires “just compensation.” That amendment also clarifies that people cannot be deprived of property without due process.
Responding to the ANC’s pro-expropriation rhetoric, the libertarian Foundation for Economic Education warned in 2018 that “the property rights of all South Africans are at risk, as one cannot truly have property rights so long as the government can arbitrarily take land away.”
Other commentators, such as South African law professor Viljoen, see the justice of expropriation without compensation.
Her recent law article on the push for expropriation, entitled “Wasting Land Amid Landlessness,” suggests that “the state is not only allowed, but perhaps even ordained to overthrow and overtake ownership, with a stewardship vision, in line with the Constitution.”
South African farmer Roos believes the ANC is caught between the idea of democracy and the idea of communism.
He pointed out that the Soviet Union trained many of the ANC’s exiled leaders during the Apartheid period.
Roos worries redistribution won’t end until “all property is transferred to the government.” He cited the nationalization of land in neighboring Mozambique after it became independent from Portugal.
https://www.zerohedge.com/geopolitical/south-africa-may-soon-take-land-without-compensation
BtoB: Wouldn't Falcon have to offer Origin the same 5.5% royalty on that 77.5% to match the Tamboran offer? That's the way most ROFR's work - Falcon can't change or amend the terms - they can only step in and exercise their right.
Hardrock: Nonsense?- maybe, but that comes from two separate PEs close to the project. I'm don't have the knowledge to argue that point one way or another. They need to find a more environmentally friendly name before proceeding LOL! as I would think the green people would rigger with that name. As an aside, whether right or wrong, it is being said that the Aussie government is wanting to get US companies involved that will drill and frack these wells to US standards - that includes US style frack fluids.
Are you saying that petroleum based fracks are not used in the US? I have heard people here in the PB talking about diesel, guaran, etc used to frack wells - all kinds of 'secret' formulations. Help me here as I am not a PE.
Newtofo: As to Falcon waiving Origin's obligation to drill the next two wells if they were to take over - that was my thoughts also until I was told that Origin has a contract/agreement with the Aussie government to drill those next two wells. Therefore, if Falcon executes the ROFR can't legally waive their next two wells. My next question was what if Falcon just drilled the vertical bores - would that meet the government's requirements - I don't know that answer but this is what Tamboran did on its Maverick well - the vertical bore was drilled because it was a requirement with the government - they will go back and complete this well later as was addressed in the Tamboran presentation,
Not many people are aware of this, but Tamboran, next year, will likely be moving towards using US style frack spacing and adopting the use Napalm Gel to carry the proppant. This gel is an hydrocarbon based product currently used in the US. With the extra dry shale bed in the Velkerri B formation, frack water is absorbed at a rate that makes it somewhat ineffective for fracking The production rate of these wells will be significantly higher just based on these twof improvements. I'm sure Tamboran has additional tricks up their sleeve with the help of Sheffield's fracking/completion expertise. These types of technology improvements will be good for Falcon whether Tamboran is a JV partner or not. The higher the effective 1000 meter flowrate that Tamboran can achieve on its Beetaloo pilot wells the greater the excitement in the Beetaloo and the better for Falcon.
GLA
jhealy: I agree with you 100% - today's share price is a gift. I'll take your advise and be careful what I wish for - door A or door B?
From what I am hearing Tamboran is giddy about the Origin/Beetaloo deal. They have big plans to move very aggressively in the Beetaloo. Tamobran will be drilling the next two wells this year but in the meantime will be working to bring in other operators/partners to help drill the Beetaloo. Tamboran will also be moving towards a listing in the US market to help raise the funding to pursue their aggressive plan. IMO, the biggest problem Falcon will have with the Tamboran deal is keeping up with their drilling commitments. Hopefully, if Philip doesn't pull a rabbit out of his hat, he works long and hard to develop a plan to keep up with Tamboran in 2023 and beyond.
With the market exposure Tamboran can bring to the Beetaloo through self promotion and bringing in other companies; Falcon's share price/value should grow with the Beetaloo excitement. So door A or Door B? I don't see either option as being anything but good for Falcon - both have their good and bad points and both certainly have their unknowns. I'm willing to accept A or B and then deal with the what follows. Either way I'm comfortable where I sit today and see a bright future for Falcon over the next couple of years.
Oleo - Regarding your concerns of potential dilution when/if Falcon gains control of the Beetaloo - There are many ways for a deal to be structured. What if Falcon brings in a new JV partner in the process of this transition?. Just how much dilution did Falcon undergo when POQ brought on Origin? I think a new JV partner could be expected to bring $$$ to the table in exchange for a percentage of the Beetaloo - we might even get a few more carried wells out of the deal!
Many ways for all this to play out - I have decided to sit back and watch at this point. Either POQ raises the funds required for ROFR or he doesn't - I can see upsides to either scenario. As to potential dilution we will just have to see what type of deal our CEO delivers. If at the end of the day its status quo then let Tamboran drill the next two wells and then Philip can go about his business of raising funds hopefully based on a higher stock price for the following wells.
I don't see our current situation being a negative for Falcon - I don't understand the pressure currently on Falcon stock but then I have never understood its price action.
Good Luck either way!
BtoB: Thanks for the feedback. It's appreciated and IMO serves the purpose/intent of this board - Posters such as you, amongst many others, want to contribute to the board and express relevant opinions while some would rather sit back, belly ache and complain - all boards have those types. I don't expect everybody to agree with that last "IMO post" but hopefully it makes some people think and express thoughtful responses - Thanks for yours.
I'm not pushing for #2 - but a negotiated settlement with Tamboran would meet one big requirement of a potential partner - they hold the right pedigree which from what I understand is important to the powers to be in Australia. Santos could also meet this requirement but are they even interested? From my understanding, Falcon's partner/deal needs more than just the funding - it needs the blessings of the Aussies. The Beetaloo is a national strategic asset of Australia and their approval of an alternative potential deal will not just be rubber stamped.
IMO, a negotiated settlements seems to come out of these types of deals. Would I like for Falcon to tell Tamboran to pound sand - certainly my top choice but only if that is a really practical/workable outcome.