Good day Ffrianbow,
Ok, I will give my take on this. Better focus on this, than the rubbish from the wannabe.
From now til Dec 2020, when FID is called, we need to come up with the money for our share of Dorado's capital expenditure, that is 16 months to go. My estimate is at least USD $300M for our 20%. We can borrow 50%, but will need to raise the rest.
16 months is Not enough time to get Buffalo up and running. We haven't even raise the cash or drill one hole at Buffalo.
Point 1: To raise the cash, we would need to discount our SP by at least 20% (say raise at 30 cents). That is going to require a special general meeting to approve it, which will take at least a month. At today's exchange rate, we would need to raise about AUD $220M (for USD $150M). That equate to the issuance of additional 733M new CVN shares. Here, we take all the risks.
We can get this up pretty quickly, provided we are prepared to take this risk. Any negative outcome (like Roc S) will mean our SP will get smashed. If we extremely lucky and diligent, we might be able to get it all three wells done by this time next year. But we would need to deploy an army of engineers and specialists to get this done. If it was possible (which I personal doubt) we have about 3 months left to make all the money (refer to the above) we need for Dorado. The excel calculations supports this.
If we can not, we will need to raise again, another USD $150M - just have a guess where our SP would be, by then?
Point 2: We can't borrow for Buffalo as there is no reserve.
Point 3: If we invite a JV partner, say on a 50:50 basis and they being the operator and we have to share profits (note, as good as our team is, we just don't have all the necessary expertise). So that means they will dictate the terms of the contract - such as adding a provision which stipulate their continual investment in Buffalo 11 and Buffalo 12 will be contingent on the outcome and scientific results of Buffalo 10, which will take months and months to resolve. In any case, its a logical step for any potential JV partner, as no one would want to spend USD $150M upfront based on reprocessing of our 3D. They will be cautious and will take their time. This mean 16 months will not be enough.
So this means we will have to raise at least another USD $150M for Dorado at the end of 2020.
Hence, my point to magpie that this can not be done within the timeframe. "I would love to see us have Buffalo and Dorado at the same time. But none of my cal can make this work - now, if Cash Call at FID was not in 2020, then it might be possible."
My concern is that we will be stuck between two projects - Buffalo and Dorado - and both requiring cash. After the first dilutionary effect (capital raise of $220M), the second one will drag our SP to the 10 to 15 cents range.
Lastly, any negative outcome or delays, will likely mean we can not raise any substantial amount of capital without issuing billions and billions of new shares - refer to FAR as an example, which will likely lead to default on our payment to our lender at Dorado (note, from the initial $300M required, we will be borrowing 50% on project finance).
Summary of my overall points; 16 months is enough time to organize Buffalo into a cash generation business; and we need a lot of cash at the end of Dec 2020 when FID for Dorado is declared.
That is why I favour selling Buffalo.
- less risks when managing only one project (Dorado),
- cash from sale of Buffalo means we might not have to raise for Dorado, if we do, it will be a small amount,
- Dorado and surrounding prospects offer larger fields than surrounding areas of Buffalo, and
- less sovereign risk in Australia.
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