Monday Thoughts:

Good afternoon All

On the sidelines watching as a longstanding shareholder with a lesser understanding of junior oil companies in relation to many on this forum – I do have a better understanding of the markets in general.

COI is without doubt asset rich but to realise those assets will of course take substantial funding which COI does not have sitting in the bank which is why the SP is sitting at 14 cents.

The sad reality of the situation is that because COI is a PLC – the value of the company is calculated as we all know by multiplying the amount of shares by the price at which the last share was bought/sold. Such methodology bears no relevance to the value of our gas reserves which is of course extremely frustrating for us shareholders. Should a potential purchase come ‘knocking at our door’ – they would almost certainly look to pay a percentage uplift on COI’s last recorded SP whilst trading was suspended. A 30% uplift is not unusual and a 50% uplift is towards the top end. This I suggest would not fill most of us shareholders with enthusiasm – with most of us rightly believing that our net asset worth/gas reserves are worth significantly more than 18.2 cents – 21 cents.

If COI was a Private company rather than a PLC – then a company valuation would be calculated on net asset worth taking into consideration the pricing metrics of our gas reserves minus liabilities. Once known - that would provide a base-line figure from which negotiations would take place.

So we are in a difficult position with COI being a PLC with our SP sitting at 14 cents – with us shareholders quite correctly identifying that the SP/Market Cap nowhere near reflects the value of our net asset base – yet to be able to realise those assets numerous financial hoops have to be jumped through – which is what any potential suitor knows.

Exactly how or when this will play out – I have no idea. One thing about which I am relatively certain is that the value that we see as existing shareholders will not be fully realised due to the points mentioned previously. I think the best that we can hope for at this stage – is that whatever deal is eventually struck that us shareholder still have ‘skin in the game’ with production fast tracked and fully funded by a Major which eliminates all of the uncertainties that have cropped up previously along with the fear that yet again our shareholding percentages are further diluted by yet another capital raise.

The markets are fickle – algorithms and those trading don’t care a ‘jot’ about company fundamentals/net asset worth etc. their sole aim is to predict correctly short-term SP movement whether that be up or down and take their margin thereafter.

As I posted many moons ago on this forum – If there was a housing estate with 100 identical houses each of which was valued at say $1,000,000 – the value of the estate is $100,000,000. However – if just one home owner died and the beneficiaries decided to offload the inherited house for $750,000 as a ‘quick sale’ – if this estate was valued as a PLC - each of the 100 houses would have dropped in value from $100,000,000 to $75,000,000. Madness as a valuation because the other 99 houses were never on the market for $750,000 each it was just one of them – yet the housing estate would now be valued at $25,000,000 less.

That's the markets for you!

Long gone are the days back in the 80’s when with a team of fund managers we identified companies that were trading at a discount to their net asset worth – then with Institutional funds we took a substantial position in those companies and worked alongside the management to rectify what was needed to close the gap between the current ‘below-par’ valuation and true net asset value. Once that point was reached – we exited as we weren’t in the business of ‘trading the froth’.

Today it’s all about trading the froth – How life changes.

Good luck all…