The current market "climate" has resulted in many buyers simply sitting on their hands...
Perhaps not a bad strategy?
These times will pass however, then the race will be on to pick up the stocks which still stack up...the stocks which offer value for what they have to offer individually and not as some over inflated "value" due to a wider sector influence.
There are some excellent stand-outs in this regard in my view...they may get cheaper, they may not...but there is no doubt in my mind a few babies are being thrown out with the bath water at current levels.
For me, one of those is CVI...as long as you have a view that goes beyond 3 days...lol.
The comparisons between CVI and NDO (Cameroon and Galoc) are becoming more apparent with every day and every release...to which I draw peoples attention to today's update from CVI, complete with "teaser" to near term news on Cameroon!
Speaking of which, from the announcement today rgarding Cameroon...
“This is a very manageable project for a junior company. Infrastructure requirements to bring the two discovery wells into production at 4 million barrels per annum are expected to cost between US$50 million and US$70 million, to which the Government will be contributing their 30% working interest share. Basically the plant and infrastructure will consist of a small offshore platform, a small bore pipeline (10” - 12”), a separator and storage facilities for condensate and a modular power station at the city of Douala, being only 13 kilometres away.”
This compares very favorably to NDO’s Galoc, but CVI’s project will be logistically far more simple, cheaper and no doubt quicker to implement…for more or less the same annual production. NDO are further down the track…but CVI will likely not take anywhere near as long to get the ball rolling on this due to the comparatively simpler path to production.
Now look at the people who will make this happen. Just as NDO bought in Whitby and crew, CVI have bought in their own “A team”…
“Conrad Maher is a well seasoned player in the oil and gas industry. He has extensive experience in Production Geology, Exploration Geology and Petroleum Engineer which will be invaluable in the proposed Angolan and Cameroon oil production programme.
Paul de Chazal is an international Lawyer fluent in the key languages of Angola and Cameroon (Portuguese and French) and will help protect CityView’s interest there.
Nik Hoexter is skilled at project evaluation and international business relationships, having been a senior member of BP’s HQ policy “think tank”.
Peter Smith was Westpac’s Senior Manager Asian Banking & Oil & Gas and has excellent Government relationships.
Paul Williams has project experience in Mauritania and runs the financial and Company secretarial administration of CityView.
John Jacoby has spent years working in remote locations and hands-on project management is overseeing the site operations in Angola.”
But then we have Angola Oil and the Kwanza Basin (onshore)…and of course the Angolan metals interests at Longonjo and Ucua, percolating nicely in the background. We also have the Indonesian LPG interests which could surprise and of course the overlapping interest in QEML, with it’s offset implications.
There is no question in my mind however the immediate interest for CVI…and path to income…is reflected in Cameroon, just as it is for NDO and Galoc.
Lets take a look at the two assets…
NDO (Galoc):
2P reserves = 23.5 million barrels NDO interest = 22.279% NDO 2P net interest = 5.235 million barrels Expected production = 10,000 - 15,000 barrels per day Expected costs = US$86m ($19.2m NDO net share) Current market cap = $260m
CVI (Cameroon):
2P reserves = 120 million barrels CVI interest = 20% CVI 2P net interest = 24 million barrels Expected production = 10,000 - 15,000 barrels per day Expected costs = US$70m ($14m CVI net share) Current market cap = $17m
Now…I will be the first to suggest NDO is further down the development path and at this stage has significantly more going on…perhaps some 8-12 months ahead of CVI…but 12 months ago, NDO’s market cap was still some $180m…some 10 times that of CVI right now…and oil was cheaper then too!
On this basis, it is really only a matter of time in my view for CVI to move up a notch or two…especially now that the corporate change appears complete, along with the recent “adjustments” to the register. We are in my view seeing something of a hangover effect here, with sentiment pretty much dead in the water at the hands of the recent “adjustments” to the register…and of course due to the wider carnage effecting all markets…but this will pass in my view and as is typically the case in such circumstances, most will look on when it is too late and ask…why didn’t I see it…why didn’t I buy more?
I rarely say this, but to sell now is just giving money away…really…this is one of those occasions where in my mind it is best to sit and look away and put faith in the quality of the people recently bought in to make things happen. The trading patterns also support this view and in my mind, CVI is literally a time bomb…waiting to go off.
Hard to say what might be the catalyst however?
Cameroon is the near-term cruncher for significant shareholder value…not only for the income it will provide, but for the anti-dilutionary impact it will have once in production. Prior to this however we will no doubt see some form of development dilution, so assuming another 100m shares are issued prior to getting this asset into full production (frankly I think it will be a lot less)…their potential net income just from Cameroon will be close to $36m per year!
That’s a net (after costs) return!
With a fully diluted register nearing 360m shares by then (after the issue of another 100m shares to fund development)…the net income potential per share is near 10c to CVI, with a likely production life of some 20 years (minimum).
Using a PE scale on our $0.10, we get…
PE x 4 = $0.40c PE x 8 = $0.80c PE x 10 = $1.00 PE x 12 = $1.20 PE x 15 = $1.50
So…assuming CVI manage to achieve first production in say 18 months…which is possible in my view given the relatively simple path to production…at which point does the market start to bring forward some of this value?
This is the question we need to ask ourselves…and one I am sure the market will eventually answer.
With a current market cap of $17m (fully diluted), one might argue this more or less equates to their metals assets alone…using most other metals explorers as a guide…and that little or no additional value has been applied for their energy assets.
If I were the company, I would be doing a spin-off of the metals quick smart…extricate this asset and the associated expenses and allow the company (and the market), to focus its efforts on the energy side of things.
I suggest in other circumstances, the current share price would be well over 20c by now…lol…and still way undervalued even at that price!
As they say, price is what you pay, value is what you get!
Cheers!
CVI Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
