STX (ASX) Ann: Half Year Financial Report

Originally posted by Adaltiora: ↑

FrankEd,

Think most people are holding tight as seems like something is about to pop, just not sure what, who, where!!

My sense is if STX is still independent come July then we will get on a great roll with our own drilling and from others in the Basin like Min Res and Beach/Mitsui going hard. There are likely to be lots of positive catalysts in the field.

For STX holders it's great to see the early excitement building around the 100% permits. Wow that acquisition (of UIL) is looking like a stroke of genius now!! All the 3D seismic next summer will hopefully high grade a bunch of new targets. They have the analogy of WE2 so they know exactly what to look for. Sometime in calendar Q1/Q2 next year we could have some serious high COS multi-Tcf opportunities in our 100% ground.

Back to the near-term and the EP469 JV it's unfortunate that both parties have a capital mismatch. It seems highly unlikely that the JV will survive the next 12 months in its current form. With Jaws costing a minimal amount to simply read the gauges each day and the Southern PB opportunities like Walyering and Ocean Hill likely to be farmed-out, most of the recent STX raise will be applied to EP469. According to the 2019 Q4 Quarterly's by the end of this quarter - 2020 Q1 - STX will have ~$24m and WGO ~$6m of cash. The delta of $18m is probably a reasonable proxy of what WGO will need to raise to keep up with the EP469 forward expenditure plan.

In the current market a WGO raise of say +$15m is going to be a huge challenge. At a typical 20% market discount this could imply a raise around $0.15c/share which is half th eprice (0.29c) that WGO raised last time. That's equivalent to around 100 million shares, which would be heavy dilution and IMO not sure whether the existing shareholder base would be too keen to pony up that amount of dosh. That may simply be too unpalatable for the long-suffering shareholders. The alternative and I wouldn't be surprised if given the choice between a dilutive raise or a shot at an exit (surely someone would pay north of 25c) then the latter may be more appealing and the WGO shareholder base may demand it.

Hopefully for both WGO and STX shareholders there could be some sort of news in the short-term, like a BPT/Mitsui gas supply deal to NWS that could lift all prices of players in the Perth Basin. However, there are clearly some sentiment headwinds at the moment and it's just not a good time to raise capital.

I'm hoping the above flushes out quickly as it's important for the JV to have two well cashed up parties who can get on and drill another 2/3 wells in EP469 in 20/21, build up a large 2P resource including the Wagina and get to FID. Then it's game on.

Not sure how all this is going to play out but I think we should expect come calendar 2020 Q2 a lot of the corporate and capital mystery in the PB will play out and come Q3, at least for STX, it's drilling in EP469 and preparations for a ton of 3D seismic in both EP469 and the old UIL, now 100% STX ground.

A lot to look forward to.

Cheers

Adaltiora

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