Hi Inv,I hope you are correct in expecting "pretty good news"...

Hi Inv,

I hope you are correct in expecting "pretty good news" ... but what exactly would that be and how measured. I think we are kind of between a boulder and an even bigger boulder.

First things first. This (equity) CR is basically about keeping the project alive by raising cash to pay outstanding costs incurred in Phase 1 drilling campaign, complete the testing (which also requires selling Namibia asset) and then WC to progress planning and design of requirements to get existing 2 wells to production ... see Section 3.1 (h) of Offer.

Nothing in this CR actually gets Revenue coming into the company. That is for a subsequent raising of debt, equity and/or JV to get about AUD$27.3M in capital to build a pipeline to connect to infrastructure and to equip the pad for production.

Now that the lights are staying on, lets talk about "The Report". The words RESOURCE and RESERVES are being used interchangeably depending on the audience. It's important to know the difference. What we have presently from McDaniel and Associates (our Reserves Auditor) is a Resource Statement, as of Dec 31, 2017, and clipped from AR ..



FOR SURE, the good news will be a (significant?) increase in the Gross Unrisked Prospective Resource. They will have gotten sufficient information from the completed flow testing to ensure that happens.

For me that is a massive "SO WHAT"

The goal is to get to RESERVES and I truly believe that while it was the intent of CE1 to be able to get Reserves assigned, I do not believe McDaniels are going to give them to CE1. Initially the phrasing was surrounding Resource (Feb 12, 2019)

then it became more of a Reserves (Mar 13, 2019)

and (May 2019)


And right there is rub!

Now comes the Capital Raising Documents (July 2019) and its clear (again) that we are talking Resource not Reserves


These words have real meaning in finance. There is no RBL for Resources. There might be for Reserves. There is also misuse of the term RBL to imply "bank debt". Banks (and by that I mean commercial banks) lend a fraction (say up to 70%) of the 1P PDP Reserves and mostly look for the loan to repaid within the producing half life of the field. You can rule that out. "Reserves" as collateral for a loan, structured as say a term loan or project finance might attract a commercial bank or more likely a "capital management" company like investment bank, mezzanine lender etc.

WHEN CE1 COMPLETES commercial agreements with their egress partners AND gets funding for building its field gas gathering pipeline connection, that will allow the a big chunk of Prospective Resource to be converted to Contingent Resource. When that is delivered, some of Contingent Resource will get converted to 2P Reserves (as in it will need capital for D&C) and some will immediately get assigned 1P PDNP (as in Proven Developed Non-Producing ... these are the 2 Hz wells we have drilled and tested). Once they are all connected and in continuous operation they will become 1P PDP (Proven Developed Producing). These where the cash flow starts and where a bank becomes interested.


The above is why I was in for the land flip and out if production was the game plan. But who knew the share price would be so savagely sold down. I see that Mgmt team still portends the "avg Montney undeveloped acreage price of AUD $4,144" as relevant. And the other chestnut of A$1.90/Mcf of 2P Reserves. On that basis, just the 2P gas reserves of PONY which stand at 5,303,534.4Mmcf or 5,303,534,400 would be valued at ~A$10B ... the NGLs can be tossed in free. Not bad for a company that has a market cap of ~C$148M and and EV ~ C$475M.

As always, do do your own research. Find out what's relevant and what it means.


I hope we gets some Reserves (that's my upside in all this) but I expect just a greatly improved Resource statement.