MEL metgasco ltd

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hombre cara

31,325 Posts.

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01/02/20

10:21

Post #: 42689079
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Originally posted by cara: ↑

You are a funny old holder ..remember this classic of yours..?
You may have forgotten but there were no cost overruns.. to one cent..lol

So here is the problem: MEL has not been completely transparent in their disclosures and here is why.
Terms of the farm out of the Vali-1 Well
Vintage paying 65% for 50%
Bridgeport paying 32.5% for 25%
That is a total of 97.5%, less than 100% which means MEL is paying 2.5%, this is not a "free carry"

Then, the announcement dated 10 Dec 2019 states that Vintage will earn its 65% by "contributing 65% of the cost of Vali-1 (up to a gross cost of $5.3 million)".

So, we now have:
1. MEL liable for 2.5% of the cost of the well, estimated at $5.3m. 2.5% equates to $132,500, not significant but it is compared with the quantum of the cost recovery, and
2. MEL liable for 25% of any cost over run from the $5.3m cap.

What do we think that could be worth?Well, on 31 Dec 2019, Vintage announced that that the drill bit was pulled out after reaching a depth of 2,657m and a sidetrack was commenced from 1,644m. That is a loss of, call it 1,000m on a 3,140m TD (Total Depth).
1/3.14 is equal to 31.8%, which, if the well cost increase is directly proportional to the depth drilled (it isn't it will in fact be higher due to the cement job at 2,657m referred to above) then the total well cost will increase to, call it, $6.987m, an increase of $1.687m.
MEL will be liable for 25% of this or $421k.

so by my calculations, this "free carry" well could in fact finish up costing MEL $550k.
That is not immaterial.
It also assumes that nothing else goes wrong except....

On the 7th January, the company announced that the well was at 3059m and the TD is 3140 yet they expect the drilling to finish at the end of this week or early next week.
It is already the 9th January so we are 2 days in and have not drilled the remaining 81m, implying less than 40m per day.

Something is not right here. There is a lack of disclosure and transparency here, IMO.
I am willing to bet this well cost blows out much more than I have estimated.

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Lucky you didn’t bet on that one ......
...you should have taken up MAYs offer while you had the chance....you know it over now...finito la musica....it worked pretty well all round ....MAY have a few MELs to sell as they had no hope of raising capital otherwise they wouldn’t have bothered with it....MEL get rid of Purcell .....
I would consider buying your shares if you have any ?
Last edited by hombre cara: 01/02/20

MEL Price at posting: 4.5¢ Sentiment: Buy Disclosure: Held
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Last 0.2¢		Change 0.000(0.00%)		Mkt cap ! $3.665M

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