Well, here we are again, hoping that the operational potential we all see (or, at least, have at some stage seen) in WHL Energy gets reflected in the share price doing something decent for once. I feel like I’ve written this sort of post before. One more time won’t hurt I guess, and hell, who knows it might even prove to be accurate at some stage.
Over the next 6 weeks or so we SHOULD see some pretty important news.
1) Interpreted 3D data on the Seychelles asset: In the 16 October press release the company stated it expected to get the final PreSTM dataset in November, and to have an initial interpretation of this data completed in December. This surely means the interpretation will have to be shared with the market in December also since this, either good or bad, would have to be materially price sensitive data, and continuous disclosure regs would force publication promptly. If the data is good then presumably in due course (latest by 31 December 2015, but quite possibly much sooner since they don’t seem to waste much time) Ophir will elect to drill (90% costs of 1st well), plus fund another 1000sq km of 3d, plus pay us another $2m in back costs.
2) Clarity on the P67 JV structure: We know that AWE has been granted an extension on the P67 decision, and that Tap is waiting to see what AWE will do. AWE’s uncertainty appears not to be on the quality of the drill prospects, but rather its own capital allocation given its recent big onshore find in WA. We’re being told that the final drill JV party should be known by the end of the year, and this includes a further farm out with the aim of being free carried on the exploration drill. Given the good 3D data, I find it hard to believe that a further farm out will be hard to achieve, even if AWE decides to drop to 30%. All of this SHOULD be finalised in the next few weeks we’re told.
3) Clarity on who has bid for the 2 adjacent blocks in the Seychelles: On 18 August Petroseychelles announced that 2 blocks next to our Seychelles one had been bid for. Under the auction arrangements in the Seychelles there is a 90 window for counter bids to be made. So this means from 17 November we are in the window where we could see this bidder being confirmed. I’ve explained on another thread why I think this bidder is likely to be Ophir, and why I think its bid is likely to be well received by PetroSeychelles, and why I think that’s good for us. I’ve also explained why it looks to me like they are already set up to shoot 3D straight away (the mystery client and location for the Dolphin Geophysical contract) and to me, it would make sense to do the second tranche 3d on our block whilst they’re there.
So, in the next few weeks we could see some powerful news that a) confirms free carried drilling in p67 b) massively enhances the likelihood of drilling in the Seychelles permit. If these both come through then I’d like to think there’s a good chance that the shares would react well, especially since Bergen seems to now have gone. If THAT happens then we might yet see the current shortfall offer get fully subscribed to. Remember it is open till 24 December 2014.
We currently have around A$3.4m in the bank, with approximately A$1.9m tied up in P67. Assuming we do manage to get free carried from the current position on the current farmout campaign and Ophir goes ahead to drill the Seychelles, and that the current offer does get filled, within a few months we may look something like this:
-Free carried on P67 drill with maybe 15-20% equity
-90% carried on Seychelles drill (with our share estimated to cost $3.0m) with 25% equity
-cash position of: A$1.5m (3.4m-1.9m as explained above) plus US$2m (further backcosts from Ophir) plus A$4m (net proceeds from current CR and shortfall placement) equals A$7.5m i.e. comfortably funded on both our current projects.
Of that $7.5m, $3.0m would be earmarked for a Seychelles drill and we know they want to spend around $4.0m on another African asset and a dual listing (which would in turn raise more capital to drill the new project).
I guess this is all a long winded way of saying that it seems to me to be quite a real prospect that this company in a few short months could be well funded with exciting and funded drill prospects just around the corner. Yes there have been disappointing missed opportunities (the November 2014 expiry options) and yes there are questions on the desire to purchase another project and dual list (I sincerely hope that DR will offer a detailed explanation of this part of the strategy at the AGM in a couple of weeks because there are clearly plenty of sceptics on this part), but I’m certainly not giving up yet. As shareholders, we’ve got to catch a break soon, surely?!?!?
QFY Price at posting:
0.7¢ Sentiment: Buy Disclosure: Held
