BPH (ASX) Sunset Date Established and Bearish Summary

Originally posted by Flambeau ↑

Not sure how I missed it. I think all of last year we didn't care, since there was so much time. But now, things have taken far too long and every day feels very ominous. I agree with Southy918, there is a sunset date, and that is 12/02/2022. Oi

I'm selling out tomorrow. I will get back in on the upwards momentum if it gets approved. The main reason is that this sunset date has increased the risk substantially.

Here is the list of reasons I have a sell sentiment (Bearish Summary):
1)

2)
Applications made under the OPGGS Act may be submitted at any time but should not be made later than 60 days before the end of the primary term or the permit year.It is the responsibility of the titleholder to ensure there is sufficient time for a decision to be made before entering the next guaranteed year.

NOPTA Lodged Date
23/01/2020
End Date; Drill Exploration, permit year 4:
12/02/2020

Submitted 20 days before end of “permit year”. 40day infraction of the Offshore Petroleum Exploration Guideline.

3)
The 23/01/2020 application has been in the Joint Authority for Decision status twice, once before the 07/08/2020 and once after.
It was sent back for further information required after reaching the Joint Authority for Decision the first time… This could have been for many many reasons. The bottom line was, the joint authority refused to approve the application in that form.

4)
“As expected, the 2D seismic data acquired earlier in 2018, whilst encouraging the prospectivity of PEP11, has not sufficiently de-risked PEP11 to justify the drilling of a new exploration well therein.” ASX:MMR 04/02/2019.

5)
“Past performance of the applicant, parent company, where applicable, and/or directors is a factor the Joint Authority will consider during the decision making process” 1.38 Past Performance, Offshore Petroleum Exploration Guideline 2015
EP386 had its application for extension rejected… they are now appealing to the State Administrative Tribunal. The permit’s term expired on the 31/03/2020 according to ASX:MMR 03/04/2018

6)
“The Joint Authority may not offer an exploration permit to an applicant on the basis that the applicant’s past performance indicates a history of non-compliance with permit conditions or the applicant does not demonstrate a proven ability to significantly advance the assessment and understanding of the petroleum potential of permit areas. “1.41 Past Performance, Offshore Petroleum Exploration Guideline 2015.

Have they "significantly advanced" the assessment and understanding of the permit? The permit is currently 3years, 7months and 26days overdue from the original permit expiry. The holders are requesting a 2 year extension on top of that... That is 5years and 6months beyond the original expiry of the permit. (from 12/08/2017 to 12/02/2023 or 4years and 6months overdue the original permit if they are able to remove 3D seismic).

7)
2.22. The Joint Authority will generally only agree to a variation if the proposed replacement work program activity is a similar or superior technique and the activity meets or exceeds the objective of the original work program commitment.

8)
Asset Energy submitted a second NOPTA application, assumably just in case the first application is rejected.

Application 1: Submitted 23/01/2020 for a Suspension, Extension and Variation.
Application 2: Submitted 04/02/2021 for a Suspension and Extension.

If the company is relying on their backup application and the force majeure event then they must submit documentary evidence:
“For COVID-19 pandemic related suspension and extension applications, documentary evidence requirements will be simplified. Demonstration of resource constraints (financial and/or physical) and/or changes to contractual arrangements with third parties (i.e. the inability to secure a staffed vessel) will be sufficient.” COVID-19 Fact Sheet: Work-Bid Exploration Permits 01/04/2020.

“The offshore petroleum Joint Authorities recognise that the COVID-19 pandemic is having a significant impact on the sector and additional flexibility will be required to assist titleholders to manage and plan their way through the current crisis.” COVID-19 Fact Sheet: Work-Bid Exploration Permits 01/04/2020.

First confirmed case of novel coronavirus in Australia: 25/01/2020.
WHO issues global health emergency: 31/01/2020
Global air travel is restricted: 02/02/2020
The pandemic started: 11/03/2020 https://www.ajmc.com/view/a-timeline-of-covid19-developments-in-2020

If they odged their first application on the 23/01/2020 and the pandemic started on the 11/03/2020, then what documentary evidence will they have to submit to say they were effected by the force majeure event?

9)
JOURNALIST: Do you support the extension of the petroleum exploration licence of the coast of New South Wales?
PRIME MINISTER: We're talking about the one down on the...
JOURNALIST: Between Port Stevens and Sydney?
PRIME MINISTER: Yeah, yeah. No.
JOURNALIST: You don't support the extension?
PRIME MINISTER: No.
JOURNALIST: Prime Minister, can I just clarify the response that you gave regarding PEP11, Keith Pitt is currently considering an application to extend the offshore gas exploration license between Port Stephens and Sydney, are you saying that you don’t support the extension of that license?
PRIME MINISTER: I am. Pretty clearly.
JOURNALIST: That will make some of our tourist operators very happy.
PRIME MINISTER: It's going to make me very happy. I think that's the right decision.
JOURNALIST: Will you be pushing Keith Pitt to make this decision soon?
PRIME MINISTER: It's a matter the government's working through, but I'm happy to answer the question - you asked me what my view is. I've told you fairly plainly. I tend to be a fairly plain-speaking person.
https://www.pm.gov.au/media/press-conference-tomago-nsw

If the Prime Minister does not support it, especially since he occupies a coastal Sydney seat and if the Coalition consensus is to reject PEP-11, to possibly save themselves from losing the next election and to save themselves from the ongoing political fallout they would have to deal with if they approved it, then they might choose to reject the permit due to any of the above infractions.

10)
MMR lost its PDF status, they are fighting to get this back instead of just trying to reinstate to the ASX. Advent's latest capital raise is not enough to raise the more than $20,965,450 that will be required for the drill. (David Breeze has previously said if they drill double the depth, then we can expect double the costs, so Advent are more likely going to need $41,930,900 for the next drill).

11)
Since the price is taking a nose dive at the moment, what is the true value of the company in its current form without NOPTA approval? (I understand it will be worth more once NOPTA approval is potentially granted, because that would reduce risk, less risk means I would value an asset more).
Valuation of BPH using ‘farmin’ value of PEP-11:
Advent Energy:
BUY allowed a ‘farmin’ to Asset Energy: “Under the terms of Advent’s farmin to PEP-11 with joint venture partner Bounty Oil and Gas NL (Bounty), Advent (through wholly owned subsidiary Asset Energy Pty Ltd) increased its interest in PEP-11 from 25% to 85% by sole funding the drilling of an exploration well within the permit. Bounty thereby reduced its interest in PEP-11 to 15%.” -MMR annual report 2011.
Therefore, BUY allowed Asset Energy to take 60% of PEP-11 for the drilling costs as of December 2010: ~$20,965,450 “MEC Resources Ltd and its controlled entities capitalised expenditure – PEP-11” -MMR Financial Statements 31/12/2010.
Hence, 100% of PEP-11, if traded at this cost would be: $34,942,416.67 Therefore, BPH will own ~33-53.29% of Advent (conditional interest, depending on Advent capital raise). If we take the lower limit, (33%, which was the last guide we had for BPH’s ownership ASX:BPH 03/02/2021) then BPH’s 33% ownership of 85% of PEP-11 would roughly be $9,801,347.88 or $12,151,206.48 after a decade of inflation.
Patagonia Genetics Pty Ltd:
BPH agreed to acquire a total 10% interest in PG Aust in consideration for a subscription amount of $50,000 in cash into the entity and the issue of 150,000,000 BPH shares and payment of $50,000 by equal instalments over 6 months to the shareholders of PG Aust (“T1 transaction”. The amount of capital issued by BPH for the consideration represents approximately 5.5% of the capital of BPH. The 150,000,000 BPH shares were issued on 30 August 2019 and the cash consideration has been paid in full. Therefore, Patagonia would be worth ~$350,000 –2.5million (depending on the share price issued at the time, capital growth and inflation [probably $0.002/share]).

Molecular Discovery Systems Limited:
unknown (still in R&D)
Cortical Dynamics:
“Total market opportunity per annum of the US, Western Europe and Australian markets only, would be approximately 11.188 million 24-hour single-use patient sensors per annum, which with an average cost of $AU20 per single patient use sensor, would represent a total revenue stream conservatively estimated to be of the order of $AU223.8 million per annum.” -Cortical Dynamics Annual Report (page 3).
“In the March 2020 quarter it was announced that the Company had secured an investment of $250,000 from IntuitiveX (“IX” and Korean based VC investor Gentium Partners (“GP”” -BPH Energy 2020 Annual Report. By the issue of 12,500,000 shares at $0.02 per share.
The Company also issued 13,991,045 shares for cash of $401,605 at an average price of $0.029 per share. -Cortical Dynamics 2020 Annual Report.
“The Company has issued 2,102,150 fully paid ordinary shares at an average issue price of $0.125 each for cash.” -Cortical Dynamics 2020 Annual Report.

171,170,433 shares x 0.125 = $21,396,304.13
16.1% of this would be $3,444,804.96

Total Asset Value: $15,946,011.45
Shares Outstanding: 664,920,000 shares.
BPH Value per share using the above variables:$0.024/share +the value of Molecular Discovery Systems.

Note:
A criticism of this valuation is that the BUY to Advent transfer seems like it was a desperate move, and if they had more time or money, they probably would not have done it.
This bearish analysis and valuation is Flambeau's opinion, it is not a discounted cash flow analysis or market value or cost approach (ground up).

Expand

I 100% think they do not deserve another extension. And majority here are 100% certain that its a done deal and be renewed. its a red or black roulette bet don't forget there is a zero to lean it past a 50% against your gamble. What is it worth with no renewal?

(20min delay)
Last 1.8¢		Change 0.000(0.00%)		Mkt cap ! $20.65M

Open	High	Low	Value	Volume
1.8¢	1.8¢	1.7¢	$5.449K	308.5K

No.	Vol.	Price($)
6	824456	0.017
12	1540969	0.016
9	920333	0.015
2	1200000	0.014
2	310098	0.013

Price($)	Vol.	No.
0.018	393038	2
0.019	820880	7
0.020	2184066	15
0.021	2721047	9
0.022	824000	4

Sunset Date Established and Bearish Summary, page-381

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Sunset Date Established and Bearish Summary, page-381

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