As a long-term shareholder believing in both our company’s management and our ever increasing in-ground asset worth – I am also a realist with a background working with fund management teams seeking out and investing in undervalued companies with a view to capitalising upon the rewards associated with the net asset worth of those companies being reflected in their market caps at a future point.
Whilst COI is without doubt extremely well placed geographically with ever growing ‘in-ground gas’ - which is in short supply and desperately needed to fulfil existing demand – we must look at the realities behind how the market is valuing us today with all of that potential – whether we think it should be more is irrelevant because our market cap at this time is sitting at $163.4M whether we like it or not.
This then begs the questions – How much will a suitor realistically be prepared to pay to buy us out? How much will Santos will be prepared to pay to either ‘up’ their percentage in Malhalo and snaffle a stake in Mahalo North or indeed buy us out in totality?
A 40% to 60% uplift from current market cap is the norm for complete take-out – with this roughly being what management teams historically have recommended to shareholders as being an acceptable offer.
Now I’m fairly certain that many of us long-term shareholders would see an offer within this ballpark being way below par and we would collectively protest and vote against the acceptance of what we see as being a too low-ball take-out figure.
So where would that leave us should we reject such an offer and decide to proceed to production? Do we realistically have the funding and experience to move from an exploration junior into a producer?
Certainly Santos will realise this – but likewise I can see no reason why Santos would not want to take us out of the frame so they can proceed towards production without worrying about a JV with COI.
Here’s a thought which from my position as a long-term shareholder that I would like to throw into the ‘cooking pot’ for consideration:
Almost certainly the price that Santos will be willing to pay for our company will be less than those of us who own our company (us shareholders) will be willing to accept – thus we will reach a stalemate position should the shareholding majority feel the same. Such a position furthers nobody’s cause – not least of which is the Australian Government Dept who is responsible for ensuring that the existing shortage of gas is remedied – so there will be understandable pressure from them to do what they can to ensure that time to production is minimalised.
Thus a suggestion should this point be reached:
I think that a ‘split-deal’ could be worked out whereby the Mahalo blocks (Mahalo North included) could be sold for an agreed settlement figure – BUT added to this is an agreed percentage of free carry production which belongs to COI – with a legal agreement to ensure that production timeline/s are met. Such a ‘split-deal’ may be a more acceptable way forward for all parties in that us shareholders will feel that we are benefitting from the years of investing in and supporting our company to get to production – likewise the ‘buyer’ will minimise up-front cost in exchange for sacrificing a percentage of future production.
Only a thought guys…
(20min delay)