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BBN. Had not realised you were on your hols !
Thanks for your reply ,and confirming my own opinion !
Agree. I thought the interview by CFO Julian Morris was very positive on Proactive Investors' 6.46: "A lot of interest and competition for partnering". The recent RNS lacked energy, excitement or clarity, pretty poor comms basically. The interview is the complete opposite. I'm happy with my investment here and look forward to a partnering update with a substantial player (hopefully)
Well said BBN. Have decided to start a position here today on the back of this muted response to the FS. Char owes me from the last cycle, big time, though, so I can well understand the market scepticism towards the current BOD. But I will judge them on results of this particular asset development as well as their ability to deliver a sound financial deal with an industry heavyweight .
@Proffit I am currently away on holiday until next week but have of course kept an eye on my investments. I wanted to wait for the expected interview before judging and as expected everything is developing as expected. They have hit every deadline so far on what has been a fairly sporty programne, and I expect the partnering deal Isa lot closer than many are prepared to appreciate.
With all due respect the talk of placings etc has no grounds when the company has around $17m in the Bank and is seeking a partner to pay a healthy portion of the costs on a license that is proving to be as valuable as was advertised. To continually judge the company on historic evidence that came from a time when they had no material discovery on the books, is simply wrong. In my opinion, at these levels, this is screaming buy. But it is for the individual to decide against their own research.
Until next week.
I would like your opinion on the RNS,
And your thoughts on when the shareholders might see some
Yalue hear !
Suresh786 I have tried to include my thoughts on questions in my reply to O&W but the key message for me is that this gas discovery was handed on a plate to CHAR (yes that company that does bad deals apparently), that does not mean that it will then automatically be handed to someone else in the same manner.
It is worth more than just an appraisal well carry because it has come far enough down the risk ladder. So yes I expect a drill plus some help with the development costs. The exploration well is phase 2 and isn't required for the first 10 years of gas at 90mmscf/d, so it doesn't need to be in the discussions with any front end partners.
This is just my opinion of course, no more.
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Thus far my investigations demonstrate that it should be well within reach although I would wish to take a further look at this when the FS is released shortly.
What is important to remember is that the government partner and holder of the remaining 25% of the license ONHYM, at development level, which is where Anchois 1 would be post appraisal well, is responsible for its full share of the development costs. So no free carry, which is very important in all of this.
Any potential partner that comes in is negotiating a percentage of of a very profitable low risk gas play (and this is in part dealing with Suresh786 question), that they would in my view of gladly paid for had it been available to them. CHAR have secured 75% for just a $1m commitment to seismic. They don't even need to commit to a drill because over $100m has already been spent on the play through the 4 drills that have taken place.
I am looking for a circa 50/50 split so around 37.5% each. For CHAR to give that away for just $15m for an appraisal drill would be criminal. I expect multiple interest because I view the CAPEX as being fairly low (currently $350m of which 75% = $262m is with CHAR and their partner). For a very good chance at a 22 year plus gas project of oil equivalent 16,000 bopd, that is very manageable and would leave ample room for further payments. Paticularly when we see that the gas play has the potential (be it more risky) to more than double in size on further discoveries at the many satellites around Anchois.
So I expect the appraisal to be covered + a cash payment that at the very least would help CHAR on its way towards its share of the development costs. It may not be big money but at a total contribution of say $130m, even 20% would help set up CHAR for debt financing facilities for their share.
That said I do still fully expect sizeable dilution but at just 365m shares in issue and 37.5% delivering 6,000 bopd equivalent, the stock can handle it.
The above are just examples. I have no idea how much CHAR really wants of this play but what it shows is just how doable it all is when the hard work of exploration has been done and one is left still holding 75% of the license. That wouldn't happen on a wildcat. So they have far more aces in their hand than ever before and from these levels I expected to be rewarded well for my support.
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@Olderandwiser Good morning I trust you are well and many thanks for your kind words.
I am just about to jet off on holiday for 10 days but wanted to respond to your questions.
In my opinion the two stocks aren't in the same league in terms of impact and standing, but as is the way with AIM, CHAR with the right tailwinds has the ability to outperform BMN over the next few years simply because it is coming from such a low base.
That said I fully expect BMN to be sitting at several multiples of its current price within the next 2 years because the market has still to factor in its energy platform, which is coming on very well now.
The key difference in terms of standing right now is that CHAR has a perceived history of doing bad deals for its shareholders. The trouble is that analysis is based on a minnow oil company attempting to convince major partners to join it on a wildcat drill. Those sorts of deals place CHAR bargaining position at a very low ebb.
The Lixus license, which has been given them on a plate is a completely different animal altogether and the market is in my view unwilling to look close enough at it to appreciate the strength of its viability and thus value it more realistically.
I wouldn't wish to go too far into what can be achieved here but to place it all in context I will say this ;
No further drilling at Anchois 1 and the existing gas discovery can deliver a phase 1 70mmscf/d for over 10 years.
1 further successful appraisal well drill at Anchois 1 to open up Gas Sands C and the that becomes 90mmscf/d for over 10 years.
I further exploration well at Anchois N with an independently assessed COS of 43% and the play becomes 90mmscf/d for over 22 years.
That play sits within a jurisdiction where there is a 10 year corporate tax holiday, with low royalties at just 5%. Furthermore, the Moroccan gas market will offer prices in the region of $8.50 per mcf at $70 brent. Even at $60 brent we are talking $7.50 per mcf for something that's likely going to cost well under $2 per mcf to get to market, plus with the GME pipeline siting just 30km in land from Lixus landfall, there is a direct link to the European market.
There will be the need for further drilling to expand the discoveries of course but what I am expressing here is the criteria on the table when CHAR sit down and talk with potential partners. Will there be significant interest at those levels and with that gas market so near, and for me the answer is unequivocally yes.
With around £13.5m in the bank all of what I have just described is currently being priced at under £3m. What it should be priced at is for the individual to decide. It is not my call nor would I want it to be. DYOR always
But in my opinion even with a question mark over BOD performance, the still opportunity far outweighs that risk at these levels. The only outstanding detail for me which I have tried to eliminate is the CAPEX
BBN, thanks for valuable input, what kind of Farm-out you would expect.
1) Do you expect only appraisal farm-out, e.g. fully carried for 1 appraisal well.
2) Do you expect one appraisal and one exploration well, fully carried.
3). Do you expect one appraisal well plus some carry for development e.g. $50million for development.
Excellent work, BBN.
I know you from old on another bb, for which my hearty congratulations are offered in your outstanding analysis and success.
How do you rate Char as an investment proposition vs that other one? I know they are quite different, but do you view Char simply as a "value" investment to park some of your gains from the other, or as a meaty, bagging opportunity over the next year or two? ATB.
As a clear example of what I am talking about, I have found clear evidence that flowline pipes can be laid at approximately $37,500 per in/km. For a 14 inch diameter pipe that equates to $525,000 per km. At 40km the flow line element of the construction should on that basis therefore come in at around $21m.
Given I have just allowed $70m for the total construction, that leaves $50m for 4 subsea trees, a manifold and the associated equipment, which looks a little top heavy but let's see.
PS I could make a strong argument for being 10-120% over because the figures I have used are deliberately conservative because I would clearly rather be over and horribly under.
Lets see what comes out when the FS is released shortly.
Apologies I left out the appraisal drill, which i had in at $14m (see previous comparison with RBD-1 costs).
So my total phase 1 cost estimate is currently running at circa at around $360m.
If its anywhere close to that figure then I will very pleased for a variety of different reasons.
Further to my ongoing costing analysis, here is a relevant example of costs in the industry today.
In Oct 2018 CNOOC purchased the following subsea system (equipment only) from Aker Solutions for $205m.
"The subsea production system for the Lingshui 17-2 field consists of 11 horizontal subsea trees, four manifolds, topside and subsea control system and a vertical tie-in connection system.
The work scope also includes more than 70 kilometers of static and dynamic umbilicals, linking the subsea development to a new, semisubmersible platform."
According to the latest June presentation from CHAR, which contains extracts from ongoing FS, the phase 1 development of Anchois requires ;
"2 - 4 subsea producer wells connected via a 6 slot manifold (additional slots for future wells)
40 km 14” subsea flow line with control umbilical" (See slide 8 below)
The rest is onshore and includes "Onshore Processing Facility" and "Export via 14” onshore pipeline," which could be as little as 30km if they decide to go down the SOU route and connect straight into the GME pipeline.
Other than 1 appraisal drill that's it for a phase 1 and a 90mmscf/d gas supply.
If we take the numbers from the case study that I posted back in April then we see that back in 2007 each subsea tree cost $4.5m and each manifold $5.7m with associated equipment for the manifold coming in at a further $9m.
Even if we ignore the associated manifold equipment we are talking 7 x $4.5m and 3 x $5.7m just on the trees and manifolds. That's $48.5m at 2007 prices, which is $60m in today's money.
Whilst umbilical and flow line costs are never like for like as it depends on diameter and product etc, a broad comparison can still be created by removing the 30km. using the 2007 study value of $1.5m per km would create a further $45m saving, although I have read various papers now that state flow lines are considerably cheaper. Still on that basis we are talking about a comparable cost for the off shore equipment of circa $110m.
According to the 2007 case study construction costs were circa 40% of the total costs, giving is an offshore all in cost of circa $180m.
The SOU gas plant and 120km on shore pipeline is costing $184m. Fro what I have been able to find out there is likely a round $15-20m in savings on that cost due to the shorter (30km) pipeline.
So we are talking circa $165m for all on shore activities and a total project estimate of $345m of which 25% is ONYM costs.
Its not 100% accurate but its not designed to be. It is designed to answer any concerns I my have for the capex. At a figure around about that level, supplying equiv 16,000 bopd, the project is going to get a lot of interest.