Although I think there is still value in this stock, I've previously sold down 95% of my holdings in CVN (at around 30c) to diversify into a basket of other larger oil companies like Santos and Woodside.
The key reason for this is that I believe smaller non-producing explorers will struggle to get financing in this environment where ESG principles restrict lending to fossil fuel companies, and inflation which makes smaller companies with earnings much further out into the future much more risky.
"in my opinion, if the business metrics stack up, it will get funded." - A few years ago, I would have agreed with that - but not right now for reasons stated above.
However, I do want to hold oil stocks because I think they offer protection against inflation, and also as a macro play as I believe there is significant underinvestment in oil and gas, that will create a lot of pressure on energy costs well before renewables can cover this gap.
So on a relative basis, I think the larger producing companies offer a better risk-reward proposition. Specifically with Dorado, I preferred investing in Santos than CVN because I don't believe they will have major issues with funding, while I think this is a huge challenge for CVN (which is now an even bigger challenge with the failure at Buffalo).
Focusing on your question - the main reason I retain a small holding in CVN is because I think whatever financing option CVN eventually pursue, it will most likely involve a capital raising as a component, and given they need a lot of capital, I doubt it will be on a proportional basis (e.g. 1 for 1 share entitlement). i.e. I hold a very small portion of shares for the potential rights it may offer as an arbitrage opportunity.
For what it's worth (and its not worth much), I think CVN will fund the Dorado development through a combination of a capital raising and further selldown of its share of the asset.
Adrian Cook will do his best to find the best financing arrangement I'm sure, but it will be very hard in this environment to access debt financing.
I would however, be glad to be wrong and if there is someone that will work hard to exhaust all avenues, it would be AC.
You don't have to agree with anything I've said, but it is what it is. Good luck to all holders, I've been following CVN for a very long time from when they had those awful assets in Thailand that they sold to fund the Dorado exploration, and there's some great characters in the CVN forums I've learned a lot from, so I wish everyone all the best.
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