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Davy Boy

16,643 Posts.

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02/04/22

21:17

Post #: 60604515
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Originally posted by huaneng: ↑

Some thoughts:

The most attractive farmin deals are done, AFTER somebody discovered a new big, commercial oil, gas field. Not before.

You only NEED a farmin partner for financing the first well when you do not have the cash to cover the drilling cost. If you have the cash, you do not need any farmin partner because you are strong enough to go sole risk.

When or if we drill two dusters the share price will go down to almost zero. No matter what happens now with a farmin or without a farmin before drilling the first well. In both cases the share price will crash. So in the negative scenario we can be sure that the share price will be down with a early farming partner as well. Personally I do not care if the IVZ share has a value of almost zero for me with or without farming partner. Because in both cases my investment will be gone, zilch after plug & abandonment.

Today I would like to offer IVZ more cash from my piggy bank to finance the two exploration wells.

In the case IVZ discovers commercial oil, gas with the exploration wells it makes a big difference if IVZ got 80% or just a smaller fraction. If we discover oil and gas several hundred millions of $ will be needed. This money is necessary to drill 20, 50, 70 ... wells, to build gathering lines, to build facilities etc. It will be difficult for IVZ to get a loan for development, appraisal from a bank because this phase will take many years till IVZ can generate a free cashflow to pay back the credit. Nobody knows the oil price in 2025 - this will be the argument of the bank. The other option is that IVZ shares can be diluted to finance appraisal and development. This option is possible and some money can be earned but it is not attractive for today's shareholders because at the end of the day IVZ will have a billion shares on the register and this option will not be the game changer option for today's shareholders.

The live changer option for today's shareholders would be to go sole risk, to discover commercial oil, gas and get a free carry. In this case big oil companies are keen to finance several hundred million $ as free carry for IVZ for let's say 40% . No need to dilute IVZ, just using this 40% to finance appraisal and development. This option will make today's share holders real rich. (The price for this option: collect some more $ today to finance the two wells completely).

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I agree with most of your post except the time frame to cash flow.
Yes I agree there will be a period of appraisal drilling and IMO IF IVZ make a discovery they should buy their own rig. I think Recon paid like 3 million or something, we could then embark on a fully fledged drilling program year round.
I believe that IVZ could get a gas fired generator up and running very very quickly in oil and gas terms.

IVZ Price at posting: 18.5¢ Sentiment: Buy Disclosure: Held
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