What would constitute a "good" Farm Out/Take Over?22 May 2026 14:49
I don't post much on here now, but do look in when I get chance. It seems most people - including myself - are hoping that next weeks AGM will be after a 7:00am RNS announcing a Farm Out, possibly even a buy-out/takeover of some description.
One thing I've not seen discussed much (although I may have missed it), is what would constitute a "good" Farm Out or takeover deal? If we are lucky enough to get either then what details should we be looking for in the RNS in order to assess the deal? I must admit, I'm no expert on either, so would welcome people's opinions and thoughts.
I did pose a few questions to AI, and it came up with the following bit ref farm outs:
Potential Share Price Outcomes under Different Deal Structures
Farm-out structures vary; market reaction depends on headline (carry, cash, work program) vs. dilution.
Poor deal (e.g., 60-80% WI farmed out for minimal carry, heavy dilution, limited cash): Muted reaction or sell-off. Share price +0-50% initially; limited rerating if funding secured but upside given away.
Base/good deal (e.g., 40-60% WI farm-out with full carry on 2-4 wells, cash upfront/milestones, shared operatorship, work program commitment): Strong positive. Typical AIM reaction: 50-150%+ on announcement (historical farm-out pops often 30-100%+ for juniors). Post-deal share price could rerate toward 4-8p near-term on de-risking + funding visibility.
Transformational/outstanding (e.g., carried development + cash for Block XX, parallel Block VII interest, back-ins/royalties): Multi-bagger potential. Initial jump 100-300%+; rerating to 10p+ if production scales visibly.
Overall modeling: Announcement alone drives sentiment/volume. Execution (drilling success, production growth) sustains gains. Dilution from any equity raise avoided or minimized is key.
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End-2026 and End-2027 Share Price Estimates (Bear/Base/Bull)
These are highly speculative scenarios, not targets or advice. Assume ~1.85bn shares base (modest dilution possible). Oil price, execution, and Mongolia stability are key variables. No major new discoveries assumed in base.
End-2026 (farm-out likely closed or progressing; initial production ramp):
Bear (no/weak deal, low oil ~$50-60, slow ramp, dilution): 1-3p (stagnation or modest cash flow grind).
Base (reasonable farm-out, $65-75 oil, production growing to hundreds bopd, appraisal success): 5-10p (rerating on funding + visibility).
Bull (strong deal, high oil, strong ramp + positive appraisal/renewables news): 12-20p+ (multi-bagger on momentum).
End-2027 (production scaled, cash flow positive, further activity):
Bear: 2-5p (challenges persist, low prices).
Base: 8-15p (sustained production, possible buy-out interest or further deals).
Bull: 20-40p+ (material reserves growth, high prices, strategic interest in assets/company).
ATB & GLA
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