Hi soredawg. The original deal with PXA I felt was quite good – they were simply venture capitalists with a corporate strategy of “making money” hence were happy to drill for oil or gas, whichever would prove more fruitful to their pockets. Should they have still been involved, undertaken a successful capital raising and not been taken over by QGC in the interim you would probably find that a drilling programme would have been locked in by now. PXA weren’t far off from lodging a prospectus as they had recently completed the second round of seed capital raising before QGC swooped in and purchased them at a premium. But nonetheless, PXA had NO technical skills, and QGC being involved brought with it leaders in its respective field. I doubt Dawes et al had long term aspirations with this anyway, and the intention (as I suspect with HeN aswell) was that these companies were ultimately set up as vehicles for takeover.
Just flipping through some other posts and I notice that there’s a lot of anxiousness towards the drilling schedule. The reasons behind the delay is not a conspiracy like some are making it sound and realistically JH does not have to update the market every 2 seconds to alleviate anxiousness....being anxious is a medical condition and last time I checked John isn’t a GP. No matter what company you invest in there are always going to be delays and I can assure you, the bigger the company the longer the delay. In comparison to several other junior and even ASX 200 companies, the CTP board do a commendable job at keeping the market up to date with their current activities. Preliminary discussions have been held and final agreements are not far from being concluded.
From what I gather, the postponement of the meeting is due to the fact that BG have extensive commitments here in Australia as it is, and having the right team to assess the situation which Richard left behind and thus move the programme forward in a desirable manner is one reason behind the delay. Richard was the driving force behind QGC’s movements into the Pedirka to which BG reps had limited involvement in – as we all know BG simply inherited the PXA assets after QGC members had undertaken the extensive due diligence required to proceed with the transaction.
Keep in mind, the package BG inherited from QGC was from memory, a contribution at top end of $32m seismic + $130m towards the drilling of up to 81 wells. Although this kind of financial commitment over several years is chickenfeed to BG, they still need to undertake a prudent assessment of their own, and work with the remaining members of QGC to deliver the required outcomes to suit all parties. It was just an untimely departure by the MD of QGC, hence out of the direct control of the CTP board, though I’m not saying this is the only reason for delays. Rich’s upcoming departure was evident last year and it’s a shame QGC did not manage the PXA undertakings for a smoother and more timely transition.
BG are solely a gas and low emission liquid hydrocarbon producer with a focus on large scale LNG. They are not particularly interested in the development of oil fields as it’s further down the list of their corporate objectives/strategy. If anything, it would not surprise me (and purely theoretical) to see BG farm out a portion of their interest in the package to another party, which they have every right to do so, but segregating packaged undrilled oil/gas rights is quite complex. That said I can’t see this happening in the near term and still see BG committing heavily to the drilling of Ooraminna and a series of 5 fully cored CBM wells before any future partners potentially move in. The ideal scenario for BG would be to retain rights to CBM/Gas and sell off their relevant interests in producing oil fields once drilled.
Further to that, it’s not only BG that have requirements to be met. Parties such as RAW, Trident and HeN are also involved at the lower end, however their ability to finance their relevant interest at this point in time is open to question. HeN missed out on last year’s campaign and should they have the finances, may be pushing for Magee to be drilled backed up by Mt Kitty – but IMHO not this side of CY09.
Outside the current negotiations the second tender package, similar to the terms of the one executed with PXA is still outstanding and desirably imho what CTP needs is to execute agreements with a second farm in partner that has aligned interests of oil exploitation. That’s not to say an agreement with a significant gas player is not welcome – but as long as they are wholly committed to its development and will be allocating resources in a timely manner to do so. It would be nice to see a liquidated damages clause in that contract though in saying that this would be hard to justify and may ultimately cause more pain than progress. Working in conjunction on good terms is what the board would be looking to achieve and rightly so.
In terms of corporate strategy, having another major party involved in the permits has several benefits. The negotiation table is more balanced and not heavily weighted on one single parties requirements, has the ability to diversify the targets or/or accelerate their development and further to this it also poses a block/buffer to any form of executable rights which may be tied to specific timeframes contained within contractual agreements.
These things aside, regardless of whether BG commit or not in a timely manner, I’d assume the board still has the power to call forward meetings and we all know the current cash balance CTP has alleviates any concerns towards a well being drilled. Realistically they could quite comfortably undertake the drilling of Ooraminna and 5 fully cored CBM’s with less than half of the proceeds from the recent rights issue. How this sits contractually who knows. Hunt rig 2 in my opinion is definitely not cut out for Johnstone, Magee or Mt Kitty. It should however have no issues drilling Ooraminna and I still believe like many others, QGC may bring in a light weight rig to drill the CBM whilst Hunt rig 2 tests Ooraminna.
Anyway, there’s a lot more to the current negotiations most can comprehend, and personally I have trust in managements execution and believe they will deliver with the best interests of shareholders in mind. A little patience is required.
CTP Price at posting:
8.6¢ Sentiment: LT Buy Disclosure: Held
(20min delay)
