I always enjoy your posts. At least do try to ferret out information from MEO when very little is forthcoming from the company itself.
I do have some comments to make on your recent post and your interpretation of the recent Chairman’s update.
Post: When I rang Meo about 3 weeks ago, I became convinced that agent and dr daz have spoken to them as well because the info I was able to get was consistent with what they previously had posted.
Comment: Where is agent and dr daz’s information coming from? I have often wondered about this as have other posters.
Post: To me this meant that they don't make up stuff and that I had confidence in what they post. They post what has been said to them.
Comment: Realy? Are you implying Saltocan that agent and dr daz are getting some information for their posts directly from MEO sources? Do they have a connection to MEO? Is this permissible under company disclosure provisions?
Post: Reading between the lines of the chairmanship update:
1.A lot of meo shareholders have rung him regarding lack of info re drills and lack of success. The chairman represents the shareholders and hires and fires top management on our behalf and must respond to shareholders the owners of the company.
Comment: Clearly a mea culpa in the recent Chairman’s letter but a very limp response to the problems identified in the company.
2.The review confirmed his opinions that it was just bad luck and the law of O&G averages that the drills were not successful. It also pointed out that the MD and the geo consultant had too much influence. Everyone in the company blindely agreed with them without critical financial review. Thus the accountant will be harder to get cash from. Basically no more risks or big spending in the future.
Comment: It wasn’t just bad luck and the law of O&G averages. It was a problem of MEO taking on an unacceptable risk when it could not or would not farm down its interests in drilling two exploration wells, Gurame and the Thailand offshore well, and accepting the exploration risk (100% in Gurame’s case). It is interesting that the Chairman neglects to mention the failure of Thailand well in his letter.
The Gurame well drilled by MEO wasn’t the first well drilled on the structure. I think that it was the sixth – so plenty was known about the geology and exploration risks prior to drilling. For some reason these risks just don’t seem to have been appreciated by MEO – either the MD and the technical involved in its evaluation.
Other companies certainly did appreciate the risk and didn’t farm in. I wouldn’t be surprised if MEO did not receive even one serious farmin offer for the Gurame drilling.
MEO spent about $100 million in 2012 (albeit not on the drilling alone although the drilling was the major proportion of that amount). If it wasn’t for the capital raised from shareholders in late 2012 and the $10 million from the investment fund, MEO would have little money remaining in the kitty.
Comment: I just wonder how things will work having the accountant involved in decisions. Were’t he and the board involved before?
3.The review confirmed that the business model is successful and would have worked but for overconfidence by the above issue.
Comment: Well yes, it might have proved to be a successful business model for MEO in the past, so why wasn’t it adhered to for Gurame and the Thai well?
4.Meo will never. Sole drill or be over confident again.
Comment: Yes, we hope they will not be quite as silly again.
5.Admin expenses are too high...he quoted prospect holding expenses are high..... Not to frighten staff. But they should be in the medium term.
Comment: Correct. No indication what MEO will do about this problem.
6. Meo is on track with major announcements to follow in due cause based on the successful track record of the deals already made in previous yrs. ie Blackwood and Heron.
Comment: I await, as always with anticipation.
MEO Price at posting:
7.4¢ Sentiment: None Disclosure: Held
