I hear you. However it does not have to be all or nothing.
In the above situation where the LD asset gets sold down, both JV partners get some cash to give back to their shareholders...and they get to stay on the gravy train paying out tax free dividends to shareholders.
To give an example:
- JV sells half of LD, once it's up and running in 2025.
- NWE, gets $1B in the pocket. Plus it retains a 10% interest in the ongoing operation at LD. (MIN would get $4B if they sold half in that scenario).
- They pay off the $200M debt, they are left with $800M
- Lets say they decide to distribute $500M as a return of capital. Not sure of the tax ruling on it, but you could get ...7cps and maybe will have to pay tax on it or part of it because NWE has lots of tax losses already built in.
- AND, you still get the on going revenue/dividends from NWE's (now reduced) 10% of LD - At $150M/pa - lets say after they pay tax theres $100M left over, thats 1.5cps per year - these are usually franked. So you don't pay tax.
- AND, they get to use some of the banked $300M from the selldown to explore the rest of the ground which they own 20%.
These numbers are meant to be illustrative - to show you how you could sell down part of the asset put money in your pocket and keep the 20% of the rest of the ground.
Some people say OH, a buyer will not go for that. They will want the whole thing. In a sellers market, a buyer will get what you give them.
Natural gas in a conventional reservoir is a Sellers market ATM. Everyone - worldwide - has done an about face.
Remember, the closer you get to obtaining cash flow from the asset, the SP will progressively increase. Lets fast forward to 2024/5. In the example above, people will see this is a possibility and they realise if they pay X, they have a chance of getting 7cps back in an asset sell down and retain the 1.5 cps per year and explore the rest of the 20% ground - and finding another LD. What do you think the SP will do at that time?.
OR
You can take whatever BS offer gets thrown at you now. and run. Make sure you give 25% of whatever is offered to the government. Lets say an offer of 10c comes in. You have a 2c entry price and held for more than a year. You will have 8c profit, but only half is taxed for CGT. So it means you pay tax on 4 cents, which if youre in the top marginal rate, you pay 2 cents. So the 10cps offer is really 8 cents. And you can take you 8 cents, and sit on the sidelines watching someone else develop the asset, and discover whatever else is sitting there.
The question here is, how long can LT SH hold out for that big pay day?, and does the board have faith in the asset and the cohunas to see it through to development and real wealth generation? Im hoping its yes to all three.
