Hi Hotbid, sorry about the delay in my reply
As you say MEO investors are a resilient lot. We have been through hard times but the core of MEO aspirations is still there.
This is my view on how a public owned company could treat the SHs of another company with so much disrespect and put them off side by making such a ridiculous 1:20 offer in the first place.
I presume it is fear of dilution and backlash from their own SHs but I don’t think the TO was very well thought out. In the O&G business especially with junior companies I think there has to be a certain amount of brashness to do the wheeling and dealing required to keep a company afloat.
Take JH for instance. He was skilled at negotiating the deals done with major companies and I respected him for that. This helped the cash flow with additional CR. Ultimately it was the absence of luck at the drill bit and the drop in oil price rendering the farmins that juniors rely on almost impossible. JHs high salary and overconfidence shown at the AGMs pictured a flamboyance that could not sit in a company that needed to tighten the purse strings.
Petr Stickland is also getting a good salary which will be warranted if he has more luck than JH in moving the company forward. I can see PS has the SHs interests at heart through the tone of recent releases. When I met him at an oil conference in Perth a few years ago he was very bullish about 454P and 488P so I hope these permits go better for MEOmites than Zeus, Artemis, Gurame et al did when JH was at the helm.
At least the present board have pulled in the purse strings whilst we progress the business plan to the next stage.
JVs are essential for juniors to get their foot in the door and the MSMN board are going to find it nigh on impossible to farmout their suite of permits cost free IMO. I agree with the other posters in this forum that the technical data is lacking for serious data room analysis. Looking at Mosman’s balance sheets they will only be able to afford shallow, direct drilling which, in tombstone substructures, will not add greatly to the picture IMHO.
But MEO SHs are aware of this and the lack of understanding of the MEO SHs knowledge base is where the MSMN board got it wrong.
They paid us no respect at all.
At the end of the day it is MEO SHs that own the company and it is our money that has paid for the numerous drills, seismic shoots and the salaries of some highly qualified staff. Unlike what was spouted in the Bidders Statement about a board wasting money. Whilst I would have preferred more money in the bank I have no problem with investment, as money has to be invested to do the work to attract major partners.
Gurame is where we went wrong as the end result, in hindsight, did not warrant the risk of drilling a sole well and went against MEO's business plan. Whilst management thought Gurame had 'Probable' status it did not share its resources at all. It is not only drilling wildcat wells that can send a company broke.
This is not saying that Mosman will fail but the risk is always there, even with the most careful planning. Being a relatively new public company I am yet to be convinced that the Mosman team know how to manage that risk.
We have often discussed many aspects of investing in the high risk O&G business including the fact that it will only taken one success to re-rate the company but some losses are inevitably taken on the way.
MSMN have come along and totally disregard MEOmites by bagging our BOD and saying how money has been wasted but at the same time not explaining how they will handle the projects we SHs have paid for. They are only touting the number of projects they have acquired through TOs or permit allocation but have performed minimal work programmes on them yet and haven’t show a business plan going forward.
MSMN appear to be trying to acquire as many permits as they can and hoping that something will come of them. As we all know, a company can have a plethora of permits but they need the funds to work them and enough prospective evidence to attract the majors to develop them.
Looking at MSMN acquisitions I was looking at their TO of Trident. The offer to them was 1:5 and their assets were:
(1) 30% VIC/P62,
(2)100% EPA 145 and
(3)17.5% EP478 (by funding 25% of the first well) or 7.5% should trident not elect to farm in and the well is a discovery.
At the time this would increase Mosman’s portfolio from 2 to 5 permits. Trident also had net liabilities of AU$855,426 which would be paid out by Mosman.
Source here
Compare this to the number of advanced assets in which MEO SHs have invested and the Mosman BOD valued at 1:20 ……. a quarter the value of the three Tridents assets.
Note also that the Trident offer (1:5) was made when the MSMN SP was 22.5p (1 July 2014) and rose to 44p (9 July 2014). Again, compare this to the MEO original offer (1:20) when the MSMN SP was 16.75p (11 Dec 2014) and the price today at 4.85p when, only now, the offer has reduced to 1:5 …. unbelievable.
The original offer of 1:20 was made probably because of the large number of MEO shares on offer. But the Mosman board must be starting to realise that dilution occurs when capital is raised to fund and build a company. This is why a long standing company like MEO have over 600m shares on offer and existing SHs have certainly earned their share over time. They will not let it go easily to an entity trying to take the easy path forward.
The Trident TO was successful but 80% (2,314,368) consideration shares are subject to a 12 month holding lock (until 14 Oct 2015). Ex Trident SHs will be waiting nervously and watching the MSMN SP.
Source here
Mosman’s SP rose in July 2014 on the promise of a discovery but is now languishing, even with the recent questionable ‘bullish’ Murchison report. MEOmites have found out the hard way that Mr Market has a long memory and isn’t usually tricked twice. All the COS 30, P50 etc. resource estimates mean nought if a company has no money or means of income whilst trying to organise an expensive drilling programme. COS and probability are just that until resource is actually discovered.
Likewise the price of oil doesn’t mean anything to a company that doesn’t produce any oil, MEO included, apart from making exploration more viable and raising the risk economics for oil companies.
MEO is facing some problems but Mosman is in a far more precarious state IMO. This is based on the fact that MEO is in a better financial state and its permits are far more advanced with a farmin partner for 454P and advanced negotiations for 488P.
TSMP, which has been a spur for many LT MEO holders, has also progressed according to recent reports.
Perhaps, after Trident, the Mosman board thought the TO business is an easy way to gain permits with the work on them already done. They took MEOmites for mugs but we have more knowledge and fortitude than they bargained for.
I am not bagging Mosman or their SHs for a moment. I am just putting my own thoughts forward about the subject.
I wish the Mosman SHs all the luck they can get as I know how it feels to ride the O&G investment roller-coaster. I will just stay on my own chosen investment ride.
DYOR
#:>))
