Why does Empire needs these sorts of skills?
Why do I believe that the Board of Empire needs someone with my skills, knowledge, expertise and experience?
Because in my own personal belief, I believe Empire is currently failing in selling its story to the market and hence one of the reasons why our share price is sitting where it is, is I personally believe there is a lack of both confidence and clarity (and the two are not mutually exclusive) in the strategy of the company to do what it should be doing and what it says it’s going to do.
For heaven’s sake, Empire is producing gas and condensate at a reasonable enough rate that its forecast revenue for FY15/16 is $23m (as advised by Empire to the ASX) and probably has net annual Red Gully and Corporate operating cashflows in the vicinity of $10-$13m (depending on current cost structures) with which to fund future growth and exploration. Not to mention that Empire successfully raised over $15m earlier this year to fund the airborne seismic survey and the drilling of the Red Gully North-1 well.
Let me tell you there are not many small gas exploration companies out there who have a producing gas project like Red Gully with a solid gas supply agreement in place throwing off positive cashflows each month, yet we don’t seem to be fully selling that Empire have that and that will help fund part of our exploration activities, and really what are they?, in our extensive acreage position, and it’s that extensive acreage position which will be the catalyst and will provide the really significant growth platform potential for Empire.
What are we missing, well with my experienced executive and investor hat on, let’s see, I think we need the following:
a well-articulated strategic plan and vision for the company, not just for the next 6 months but for the next 3-5 years which needs to be presented to the market and more importantly properly sold to the market and accepted by the market, such that the market is excited by it.
a strategic plan which encompasses
when and how is Empire going to drill and develop the Red Gully and associated fields;
when and how Empire will over time develop and seriously increase the capacity ( and I don’t just mean by 5TJ per day to 15TJ per day – why not increase it to 30TJ per day (which is what the export pipeline is rated at) of the Red Gully Processing Facility to maximise getting the maximum cash generated from this production hub as soon as possible and which can be used to help fund the real exploration growth prospects of Empire of its extensive acreage position;
when and how Empire are going to fund and complete the extensive exploration program and commitment activities and fully utilise the significantly valuable information that has come or will come from the results of the airborne seismic survey to unlock the potential value of Empires extensive acreage position. The estimated net annual Red Gully and Corporate operating cashflows of $10-13m that I mentioned above is only the equivalent of 1 deep conventional well a year, let alone the costs of seismic and other field and operational activities;
what opportunities are there to look at acreage and assets outside of Empire’s current tenements in order to accelerate its growth;
some guidance to forecasts, if there is enough confidence to give the market and shareholders a reasonable estimate of forecast revenue for FY15/16 when you have variables such as volumes and things such as condensate prices, foreign exchange rates which are out of your direct control, then surely providing the market with a profit guidance that takes into account those same volumes and one would expect operating and corporate cost structures which are more in the control of the company should be a reasonable expectation. It’s hard to fathom how well a company has performed or could perform in the future, if you don’t have a benchmark to compare it to, and revenue is only a part of that equation. Empire should be providing guidance on profit or EBITDA, EBITDAX or simply EBIT guidance to the market if it wants to be taken seriously in my view.
a plan on how ERM will be paid in August 2016 (or before) for the assets Empire acquired from them and how will that be funded including any impact of any potential Top Up payment; and
critically for investors, a plan or strategy of how all of the above is going to be funded without massive dilution and equity raisings or selling/farming out of Empires current assets at unsatisfactory prices.
removal of the uncertainty of the potential consolidation which the Board has said they will do before or at the AGM, which for completeness sake, whilst I think at some time a consolidation has to be done due to the number of shares on issue, in my opinion NOW IS NOT the time, not enough is being done with enough confidence given to the market to support Empire in a post-consolidation position and the above well-articulated and sold and accepted strategy really has to be in place for the market to truly successfully support a consolidation, there is still significant activity to do, and I will provide in later postings my personal views and other relevant information and statistics on this particular issue to support this personal view.
If Empire have this Strategic Plan and Vision and can show and sell this to the market, that it does have ambitions and it can realise those ambitions, then maybe, just maybe, the market might accept its potential and change its sentiment and people will want to seriously invest in Empire and buy meaningful stakes in the company. Do this and Empire has a great chance to see its share price increase significantly over the next couple of years.
EGO Price at posting:
0.4¢ Sentiment: None Disclosure: Held
