tap's value, page-6

gdbeech:

1. I think the last window for trading by management was before they gas discovery at Zola. After the Zola discovery, management would have been in the process of making a decision on what to do with it - more drilling, development, or sell it. My understanding is that they cannot trade when this process is underway (would you not have been suspicious if the directors had traded on the stock, shortly before announcing their intention to sell Zola?)

Further, now that they are engaged in a sales process of major assets, they may be privy to information that is not available to the broader market - e.g. level of interest from companies expressing interest in buying their stake, details on what is being offered for those assets etc. I don't believe they would be able to trade with this information not being publicly available.

With regarding to management trading in TAP shares prior to Zola, I think the business case for TAP would have been substantially less lucrative, given that:
-share price at the time was higher than it is now;
-this would have been prior to the Zola discovery;
-this would have been prior to BHP buying part of their stake in Tallaganda;
-this would have been prior to the drilling of Tallaganda.

The above points have changed the business case for Tallaganda quite a lot.

2. Regarding the recent lawsuit, the impact could be anywhere between zero and the $93.6 million claimed by KOV Borneo plus expenses. If successful, this
lawsuit would put a huge wrecking ball through any valuation. I'm not a lawyer, and this is entirely my own personal view, but I don't see how you could hold the reciprocal parent company guarantees exchanged between KOV Borneo and TAP in 2010, in perpetuity. When TAP sold its stake, it relinquished all control the asset - so the agreement should have terminated at that point. I admit I have not seen the actual agreement, but I not see how TAP could provide parent company guarantees that would stand in perpetuity, when it no longer had control over the asset.

Secondly, even if KOV Borneo is successful, the extent of damages should not be anywhere near what they claim. TAP had written down the value of its 39% interest to down $2 million, following the two bad well results and an extensive sales process. Based on this, the value of the Block-M asset would be $5.128 million. KOV Borneo has a 36% stake in this, and claims the book value of its asset was $87.7 million. TAP sold it's 39% stake for $2 million. Based on KOV Borneo's valuation, TAP's stake was actually worth over $95 million.

If KOV Borneo really thought its own 36% stake was worth over $87 million, why didn't it buy TAP's larger 39% stake at a discount of around 98% according to KOV's valuation? For me, this makes KOV Borneo's claim a load of rubbish.

The views expressed above are my own personal views, and should not be considered as a legal opinion, or investment advice - Do your own research!