egm notes, page-9

Here is what I copied and edited from Kato's excellent post. Note 2000 petajoules of gas could be around 800mil gross for the Mt Kitty well, of which CTP would have 30%. Cheers Kato.

Hi All :-),


The following is a summary of the meeting and is not meant to be an exhaustive summary. (Apologies for typos etc, a lot of typing and I would like to enjoy my weekend).
The financial structure of the purchase of Magellan was discussed at some length after a couple of questions from the audience. My impression is that it was a very well structured deal and importantly gives CTP (Central Petroleum Ltd) flexibility to operate without needing to constantly involve the bank. It was also a strong vote of confidence from Magellan in CTP (Central Petroleum Ltd), given that Magellan is now a 11% shareholder in CTP (Central Petroleum Ltd).
RC (Richard Cottee) was asked what he thought the Magellan assets where worth. He answered by saying that CTP (Central Petroleum Ltd) gets for $35M:
• 6 producing wells that would cost $8 million to establish = $48M
• They get 2800 Horsepower of movable compression, that would cost $15M to replace
• Therefore, roughly $63 million of avoided cost to deliver proven gas reserves.
• Reserves of around 53-54 petajoules of 2P gas certified
• 3.3 petajoules per annum of sales gas already contracted, gas flow stream that pay back $25 million of debt + interest over 5 years, plus another 15 years of sales contracts, CTP thinks that Magellan was an extremely good acquisition, Magellan wanted shares since it was a value add from Magellan perspective given CTP (Central Petroleum Ltd) acreage has Magellan surrounded.
• A mature asset + blue sky surrounding (CTP (Central Petroleum Ltd) acreage) it’s worth a lot more for farm in deals. Blue sky without mature asset = risk. The combination of the mature asset with the blue sky is equivalent using the wisdom of the ages with the impulse of youth, you end up with more than the sum of the individual pieces (a synergy).
• Magellan puts CTP (Central Petroleum Ltd) is a strong position to sell gas either through a future pipeline with Santos or via Magellan, it gives CTP (Central Petroleum Ltd) the ability to flex in and out of who they sell gas to.
• Wells bought after testing, look like they are better than advertised.
• When RC was pressed on what he thought the share value of CTP (Central Petroleum Ltd) should be (which he simply can’t answer), he replied that “my grand farther had always said, that when you feel rope around your neck, you don’t jump.”

A board member said that industry players see it as a great deal and a good fit for both Magellan and CTP (Central Petroleum Ltd).
All I can say, is that I am impressed with thoroughness of what CTP (Central Petroleum Ltd) management have done.
Once official business of the EGM (Extra Ordinary General Meeting) was over, RC (Richard Cottee) got up to talk and covered the following:
• Santos, in the Southern Amadeus basin, completed 1,500km of seismic. That is to test the southern flank of the Southern Amadeus which remains relatively under explored. What CTP does know, is the seismic shows text book geology, the question that has remained is whether or not there is charge underneath the rocks given the perfect geology for trapping the gas. An important step in seeing if there is gas is in the rocks is the drilling of the Mt Kitty well. A trading halt had just been announced, and RC (Richard Cottee) said “that in the words of the rolling stones, jumping jack flash, it’s a gas, gas, gas. Had very positive indications, apparently official, and waiting for total confirmation, it could certainly be the company maker we are looking for. “
• Mt Kitty could be the tipping point or catalyst for getting a pipeline to Moomba which would equate to a 30% uplift in the price paid for the gas.
• This would create infrastructure across the Southern Amadeus and allow smaller gas fields to be economic to develop.
• The acceleration rate of the company since Jan 14 has been enormous.
• RC (Richard Cottee) made the comment that he has had more assassination attempts on his life than a US president, RC has taken steps to protect the company in the event of major success and a diluted shareholder base. To establish this level of protection was the consolidation of shares, which did not make sense to some people, needed to repair the share registry. When RC started the top 20 shareholders held less than 15% of the stock, less than a blocking stake on a take over, highly vulnerable, if your stock is full of day traders looking for $0.01 or $0.02, you won’t get value of your stock if you get a stampede for $0.02 cents on your stock. No longer at the mercy of people who are seduced by $0.02. So as of today, CTP’s (Central Petroleum Ltd plural) top 20 shareholders hold 33% and can block a scheme of arrangement, block control through acquisition and RC said that moves you into the Oscar wild aphorism “I know what I am, it’s only a question of price”. RC (Richard Cottee) truly hopes to build a long term major Australian oil and gas player, RC (Richard Cottee) wants to make sure that if he fails because of a take over, that his shareholders are obscenely bribed as they were at QGC (QLD (Queensland) Gas Company) and not nickel and dimmed out of their shares. After 18 months of his reign of terror, enormous progress has been made, hopefully when true confirmation comes through from Mt Kitty a bright new world will emerge for the patient shareholders who have backed CTP(Central Petroleum Ltd).
• RC (Richard Cottee) was asked “Is Mt Kitty and elephant or a duster?”. He answered by saying “there is obviously a degree of grey area. The elephant is 2,000 petajoules, if it’s filled to spill from the structure. It may not be filled to spill. You can get a gradation, the other positive but no so positive if it’s proven that there is gas charge in the Southern Amadeus which is pretty well proven given the Mt Kitty result. With all the structures that have been uncovered through the seismic, CTP(Central Petroleum Ltd) thinks that the probability of finding a company maker in the basin is reasonable. If Mt Kitty is only 30% filled, its only 30%, if its 100%, bang your off to the races.
An industry veteran and shareholder of CTP (Central Petroleum Ltd), then got up to say the following to RC (Richard Cottee) which I endorse (his opinion is worth listening to, given he does know what he is talking about and is a man of substance)
“Personally, I would like to congratulate you on what’s happened over the last quarter. Like I said at the last meeting if I could have foreseen, then, what has happened in that quarter I would have been amazed. I’m of the industry and the quality of the people that you have sitting at the front of this room speaks for itself, I’d like to thank you very much and the whole team for what you have done, I’m very pleased with it and wish you every success”