Be patient Ziggypop. The price rise will come. From the COE...

Be patient Ziggypop. The price rise will come.

From the COE managing director's address to their 2015 AGM, regarding the Tangai Sukanani KSO asset:
"Over the past two years the company’s Indonesian reserves have been lifted from 0.35 million barrels of oil to 1.7 million barrels of oil. Gross joint venture production (of which we have a 55% share) has been increased 600% from 125 bopd in September 2012 to 754 bopd in the last quarter. The current facilities capacity is being increased so gross production can be further increased to some 1,000 bopd. A full field development will further increase production to some 2,500 bopd."

- after which COE became less focused on its Indo operations and resolved to offload the lot.


BAS latest AGM presentation described the TS KSO as Proven operations with substantial low-cost and low-risk development options".


A February 2016 research report on COE published by Ord Minett attributed a $14m value (down from $20m) to the TS KSO. A March 2016 Taylor Collison research report attributed a $10m sale value to the TS KSO. BAS got the asset for $2.54m on a predominantly deferred-payment basis.


I remember Robert Leemey, who was part of the earlier failed acquisition of the TS KSO (for want of government approval), from his time with Triangle Energy. John Towner, TEG's executive chairman at the time, when I questioned Leemey's high cost to the company, described Leemey as being one of the smartest guys in the industry in the Indo region. Leemey, not to mention BAS board members who are also worthy of great respect, obviously recognised significant value in he TS asset.

BAS is well managed with no debt beyond what's due to COE and that, I've no doubt, will be comfortably repaid from existing positive cash flows and option conversions.

Finally, my observation is that the market is presently applying a very high discount factor to oil & gas projects. That, I believe, is why we got TS so cheap. As time passes and the oil space improves that discount factor will come down, the TS field will be developed, and the value of BAS will go up on both accounts but in the meantime the high discount affords asset acquirers great opportunities and returns.



All of the above, taken together, gives me a firm belief tat the stars have aligned for BAS, that we should aim high here and that patience will greatly reward us.