Warm greetings to all. I am a little late with this, apologies for the delay ... First up, a one time only personal disclosure & waiver, one can skip it to 'company value' header if they so wish. : )
Personal Disclosure & Waiver.
This post, like all others, is a colloquial view & a personal interpretation of where this company lies presently. I feel an obligation to follow through on opinions previously strongly projected, this is a guidance structure only & would recommend members to follow through with their own research &/or get external counsel always. In the past, people have queried as to who I am, this is irrelevant & those that are aware I would ask that they respect the privacy of the pseudonym. I shall endeavour to be honest, transparent & accountable in views expressed & as such make it clear that I'm not an E&P sector competent, never claimed to be, learning always ...
I manage a (relatively) very small fund having earned a 50% equity position through the achievement of performance & growth of the fund within recognised time frames. I have one partner who extends unequivocal trust allowing me total flexibility to operate in whatever parameters I deem valid & like many of us, it's simply sink or swim till we reach the level that gives the total guarantee of continuance. I generally stay liquid, my trading style would be categorised as speculative fundamentalism with minor technicals. Long-term equity investments are the exception for the fund & when doing so, are paralel with the 'Zurich Axiom', ie- evolving, high maintenance, high impact, precision positions that have little threshold for error & as such, adhere to very strict sector, management & asset criteria. This choice of strategy is very aggressive, obviously one is either going to be wrong or right, so exhaustive research & liberal risk tolerances become integral ... No-one's ever 100% correct so when I do err, - I work to understand why, dismiss the ego, pick myself up & learn from it. I then move forward with (amended) pro-active structures in place & notch it all up to experience ... The market will always be here & as our economy & the domestic weight of money grows, so too does the opportunities therein.
Nido Petroleum is & will continue to be our primary position because of the combined medium term sector outlook, the broad 'blue-sky' asset values of the company & certain uniquities of management professionalisms, competencies & motivations leaving it quite 'peerless' in current market dynamics. HDR is the only company I would use base parallels to & in years to come, if management achieve what I believe they can with these assets in this sector's environment, I honestly think that NDO will be the new parallel that all junior hopefulls in the sector will strive to be recognised as. Our exit, which may be many years away, will be dictated by the underlying fundamentals & future growth variables of the company presented at that time, combined with a change of fund philosophy as more material substance & growth is achieved. Ultimately, I would like to splinter off and develop a high impact derivatives fund, that will of course occur in time when I have developed greater resources.
I find HC to be a very valuable community with a high content of 'good guy' characters that are genuinely there to assist others so I have chosen to follow their example & focus on one company at a time, (NDO). I am not, want not, nor claim to be the forum's NDO 'expert/guru', that recognition justifiably is & should be with T4P for sharing his in-depth speculative assumptions in the early days rather than a 'johnny-come-lately' like myself or those that continue with one-liners followed by 'dyor' tags. There are many NDO contributors that have earned a lot of respect & appreciation for their continued input, so without naming names, they know where their intentions lie, many thanks & good luck always. If I assist in threads & I'm right more times than I'm wrong in assumptions or interpretations, I then return something of value back to key individuals & the forum in general. Despite the obvious ramp brigade that swim only in the tides of their own egos & self-interests, I think people sometimes fail to aknowledge that amongst us are some very high net-worth retail players, industry analysts, junior fund managers, brokers & individuals that collectively represent greater experience, wisdom & guidance than what any single newsletter, course, software program or 'boutique' brokerage could provide & I continue to learn a lot from the exposure to their opinions, many thanks to those people. Finally, I have no problem with any persons reproducing any post of mine as long as it's in it's entirety so context remains uncompromised. I always welcome objective/constructive input for if I have false/invalid assumptions/views, I certainly wish to be aware of it so that I can save myself time, money & energies, I may not be able to respond immediately but it will be absorbed. Anyway, having now stated the above, time to move on ... : )
Company Value.
Determining what is a fair value market capitilisation for NDO whilst the collective market is in the process of doing so for those of us that don't have a PHD in NPV calculations becomes some-what difficult. Directly below is one attempt to illustrate a snapshot fair value breakdown using very lay, simplistic methods presented as a very plausible broker report post confirmation announcements. Below that, is a brief(?) commentary open to debate in defence of & justifying such applications.
Strong speculative buy - ($0.11) Short term price target: $0.22 Valuation: $0.25.
Comments: (i)Galoc field development confirmed & scheduled production from field Dec06. Farm-in partner is the Vitol Group - major investment-grade company with market cap > USD$40b, one of the world's largest independants. (ii)Further acerage awarded - SC5X, (1.26m acres), contains seven identified exploration targets, (three advanced). High-impact exploration permit considered to be amongst the best in the highly prospective NW Palawan basin, (Philippines).
Investment case: NDO remains significantly undervalued though the market is very quickly beginning to understand this in reflection to multiple institutions present already on her register. Management ability has surpassed all reasonable expectations having turned company fully around in under twelve months. Broad diversified asset base - the company is by no means opportunity constrained & will emerge as a strong mid-tier producer by CY07.
Details: Galoc field (22.279%) two well horizontal development projected flow rates @ 7,500 - 10,000 bopd each - CY07 NPAT between a)AU$58.35m & b)AU$77.82m based upon an oil price assumption of USD$50/bbl & PSC. NPV Galoc p/e 2.2x forecast CYO7 NPAT a)$0.2024 & b)$0.2704. NDO debt component for field development fully underwritten by Vitol
EV (pessimistic) AUD$23.142m - $0.0365 -North sea assets -Cool Energy investment -West Linapacan field (109mbl) development proposal presented to JV 25/05/05, Vitol may be farminee -Coron nth exploration structure technically advanced
Whichever way one attempts to value this company using industry standards the results are more than encouraging & the above was based on using only pe2.2x CY07 earnings. : ) I certainly have no problems with anyone forwarding that 'report' off to their broker for the house analyst to comment on but would advise not to reveal the source till after he reviews & commits a view on it, (if HC source he'll dismiss it), would appreciate any responses/flaws to be shared with the forum.
I have pasted two prior posts at the bottom for those interested, one relating to the my impression of the 'team' at the AGM & the other that contains 'simplistic' valuations that sparked a little debate. NPV's are complex & can be manipulated by those that know how ... using simplistic valuations that are above perceived industry standards sometimes increase risk exposure & do not eventuate ... BUT ... if one is confident in future sector performance, specific management competencies & the future asset realisation(s) by the company, then such calcs can actually reduce risked exposure to other elements of the company & deliver very healthy returns to the committed investor rather than applying a blanket pessimistic NPV formula that encourage the investor to a premature exit through a false perception of the company being 'over-valued' & thinking they may be able to re-enter at lower levels.
An example that The Analyser has used is BPT so I'll stay with that. If an investor some time ago applied greater than perceived industry NPV calcs to their reserves because of management competencies, it would have given the investor confidence to retain exposure through-out a well balanced exploration program resulting in very good returns & current positioning/exposure to a very well managed dividend paying company in an extremely good sector that is literally printing money. That train of thought would have preceded the 'evolving' NPV structure that was then applied by the Euroz house analyst when the price of oil increase justified a committed increase to BPT's reserve NPV encouraging strong retail positioning in the 40.5c-48cps range which then preceded/pre-empted First Boston Credit Suisse's 'evolving/amended' NPV+EV application that became the catalyst for the rally/rerating that pushed the share-price up to 72cps. nb-All of the above is a very simple caption & aknowledges the BMG asset factor. While I'm on BPT, they are currently producing up to 4,000boepd, (very similiar to what the Galoc field alone may produce for NDO though the economics of Galoc represent significantly greater net value per bop), fundamentally strong & are currently capped at AUD$221.7m @ 65c with many ranging house valuations/targets generally echoing a current strong buy/hold. For EV, despite having a very active, attractive, sustainable well balanced exploration campaign, BPT does not have access to a major hydrocarbon fairway with multiple 'high-impact' structures that the Palawan Basin may eventuall be recognised/proven as containing.
Back to the point though ... NPV calculations for oilers' assets/reserves is not quite as simple as some think. As small retail investors, we can simplify if we are committing to long positions. There are wide industry variances in NPV calculations hence sometimes conflicting house values. Some analysts leave a lot of profits on the table because they don't apply an 'evolving' NPV structure that changes to a specific formula application relative to the uniquity/economics of the asset & the environment but from that experience they & the collective market learns. One has to also understand that NPV calculations differ between institutions & retail. For full-service 'boutique' brokerage houses that facilitate both, the institution always takes priority over the retail, the analyst may actually use different formulae. Perceived industry standards may actually differ greatly to what is currently applied, ie- inform the general market how you're identifying value before you take a position then the playing field is level & one has no advantage. EV is even harder to calculate & generally physically reflects market/sector/company sentiments/perceptions relating to potential speculative values derived from asset realisation(s) & management competencies.
I personally am comfortable using an in ground NPV of AUD$20bl for Galoc when one considers; -a fourth quarter WTI price closer to USD$55bl than USD$50bl. -The Vitol group being the farminee. -the Galoc field despite being off-shore will in fact be a low cost, high production operation (eg- using leased equipment), and that prior EWT flow rates combined with new technologies & practices, reservoir understandings indicate that each well may flow at rates conservatively guaged @ > 7,500bopd. -that the recoverable reserve estimates & advanced stage of reservoir understanding may be greater than what is currently factored, ie- up to 50mbls. -the high reward to 'first producers' relating to the regional PSC substantially increasing net values per barrel produced. -the time to production will be no more than 18-24months away, (thanks to the prior expenditure of Unocal in their due dilligence studies & recent efforts from the Nido/Vitol group technical teams) -due to the broad asset base & dynamic management it is too difficult for me to ascertain true EV. etc.
Further, if West Linapacan was given the go ahead with Vitol, until concerns such as overcoming the technical difficulties, time frames to development, projected flow rates, etc were made clear to the market, I would apply an evolving NPV application of AUD$1, AUD$2.50, AUD$5.00, then AUD$8.00 etc as each criteria was met & satisfactorily addressed.
To apply a consistent unchanging blanket NPV per in-ground bbl/oil across fiscal geography would be borderline incompetence/ignorance/negligence. for example: The WPL/HDR Tiof discovery in Mauritania vs the STO Jeruk discovery in Indonesia vs the NEO/OPL Jack Hamer discovery in the U.S. vs the BPT/AZA BMG field in Australia vs the NDO/Vitol Galoc field in the Philippines. nb- am not comparing field sizes, oil quality, geology, reservoir depth etc ... simply highlighting the value differences per in-ground barrel in relation to location variable only.
Whilst I have now mentioned AZA, it has been suggested that AZA poses better leverage than NDO.
'AZA : ANZON PETROLEUM is a good connection to get the next ride up as it is bubbling away nicely , drilling on a dead cert [Basker-2] in 3 weeks . Oil already found in Basker-1 , and with Basker-2 drilling right next to it , has got to be a gusher!!!!! Euroz has just put out a valuation [oil being US$50] of AUD$1.24 per share for AZA on 5/7/05. AZA is 74c presently.'
AZA has a fully diluted capital structure of 334.2m, (approx. 20m options & 190m fpo escrowed - p33 of annual report). Therefore according to the Euroz analyst if the paste was correct, current value for AZA is regarded as AUD$414.40m. Coincidentally, by Q406, NDO may be in a very similiar position with a six-eight well drill program weeks away, similar reserves if West Linapacan has been certified & development going ahead with Vitol combined with higher impact cash-flows hitting the coffers in a matter of weeks/months from production at Galoc & that would be of course allowing for no further development or value creation achieved whatsoever by the company regarding any of their other primary or secondary assets or for that matter, oil at greater than USD$50/bl. Therefore a pessimistic valuation by industry competents/experts if the above was indeed the case by Q406 would be NDO experiencing ONLY a 594.97% growth in market capitilisation in less than eighteen months. If someone can convince me in detail how or why or without insane risk or incredible luck AZA will grow into a AUD$2,465m company in eighteen months AND prove to me why I should trust their management to the degree I trust D. Whitby & his team, then I may be tempted to get a little investment position but if not ... then I wish you all the best but I'll stick with NDO thanks! : )
Anyway, hope this assists in a very long winded way, (got a little carried away this time), it's certainly going to be a very interesting 'two' weeks for NDO. nb- I still stand by my statement that this week's trading range will be 12c-14c, with an eventual base capitilisation of around AUD$100m-AUD$120m within the next six to eight weeks as the market digests & receives confirmation from the company the impact of Galoc, Vitol & the new acerage. I'll either be right or wrong! : )
Warm regards to all & good luck in any & all positions ... : )
nb- Disclosure & position covered in the above.
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Subject the vitol group & more ... Posted 14/06/05 05:44 - 292 reads Posted by Blue Griffin IP 144.136.xxx.xxx Post #620635 - in reply to msg. #619281 - splitview
Early morning greetings to all ... : ) I certainly didn't think that I would be the one refuting my own post but it appears that I made certain erroneous statements relating to The Vitol Group. Anyone that has tried to research Vitol over the week-end will be able to understand where my error(s) lay, sincere apologies for this & the correction is as follows.
The Vitol Group had a 2004 turnover of USD$61.1 billion, (AUD$79.609 billion), with 2005 turnover expected to be substantially greater than due to increased market share, higher trading volumes/increased demand & a higher value weighted average price(s) for oil & oil derivatives for the CY. I have found it quite difficult to identify specifics because of the limited public disclosure requirements of private companies/groups, however, it appears that their capitilisation may be closer to USD$40 billion, (AUD$52.117 billion) than the USD$27.3 billion figure previously stated. It is thought that their profit for 2004 was in the vicinity of USD$11 billion, (AUD$14.332 billion). If anyone can confirm or correct these findings it would be appreciated.
What-ever the specifics are, I think we can all agree that this is as good as it gets! Vitol is indeed an apex company, it is, one of the world's largest independants, (at least that statement remains unchanged since Friday). : )
Because there has been some query, I will quickly verbalise a few thoughts starting with how (I understand) the Galoc field ownership to be. Please note that this is an assumption until we get due confirmation from the company.
-Prior to farm-in, Galoc field ownership was; Nido Petroleum - 22.279%. Philippine J.V. - 77.721%. (Philippine J.V. consists of: Oriental Petroleum and Minerals Corp., Alcorn Phils.; Alcorn Gold Resources; Linapacan Oil, Gas & Power; Altisima Energy; Basic Petroleum and Minerals; Petroenergy Resources; Phoenix Energy). -The Galoc Production Company, (G.P.C.), by paying for the field development costs, earn 80% of the J.V. holding. (G.P.C. consists of: Cape Energy; Team Oil; The Vitol Group). -Nido Petroleum's field ownership remains unchanged due to bringing the farm-in together, maintaining responsibility for funding of its equity share & completing all technical work for the project at their own expense. -Therefore, post farm-in, Galoc field ownership is; G.P.C. - 62.1768%. Nido Petroleum - 22.279%. Philippine J.V. - 15.5442%.
I personally perceive it to be an extremely positive indicator that NDO satisfied & gained Vitol's confidence to the extent that there was not only no reduction in field ownership but the farm-in offered a fully underwritten debt facility to cover Nido’s debt component of the development costs. : )
Relating to continuous disclosure requirement concerns for NDO, the 'Galoc Development Update' released 09/05/05 would cover the company up till the moment that the farm-in has been officially concluded/signed off. The fact that the market didn't understand the true significance of the 'major investment grade, European based oil company' at that time & that some elements of the Phillippine press has revealed the details prior to official conclusion is beyond D.W.'s control & is highly fortuitous to those individuals that have understanding of this.
Regarding the possibility of a speeding ticket by the ASX, these guys just announced that their investment in Cool Energy just received the biggest nod of approval possible on the global stage from the subsidiary of another apex company, one of the largest E & P players in the world ... The Royal Dutch Shell Group of Companies. A strategic agreement involving the intellectual property licensing with Shell Global Solutions International BV covering the cooperation with Shell in technology development, the sharing of intellectual property developed by either party & the business areas in which Cool Energy and Shell may commercialise the technology. I don't think anything more needs to be said there, I'll leave that to the industry competents. : )
This company has the full validity to sell itself from this point on but I will try to contain & emphasize once more. Galoc is not, the company ... simply the golden key to, the company. It will generate the cash-flows necessary to facillitate the exploitation of their current & future asset base. We have invested in NDO primarily due to all that the Palawan Basin & the Pagasa Turbadites may reveal, that is, multiple hundred million barrel exploration targets with maybe a couple of billion barrel structures included. The road to that exploration lies with the exploitation of the Galocs, the Tara's, the Libro's, the Linapacan's, the Nido's & the Matinloc's, & without a doubt ... strategic regional relationships formed with companies such as The Vitol Group.
Page 25 from the AGM presentation, “Evaluate & high-grade at least 6 structures & mature to prospect status by end-2005 with the intention of drilling by late-2006/early-2007” ... I believe The Vitol Group & Nido Petroleum will be involved with much more than Galoc, time will tell. I believe that the Galoc field will turn Nido Petroleum into a AUD$400M producer within two years & from that point, it is simply the beginning. Whilst other assumption reward tables relating to Galoc earnings that I have produced before have allowed variables for the individual to select what they personally deem valid, I will include one final table down the bottom that, until such time the company releases projections to the contrary, best represents my own opinion.
Paralels between WPL, HDR & Mauritania should be kept at base comparisons due to many obvious differences/variables though should still be aknowledged. Potential impact to capitilisation growth from the Vitol, NDO & Pagasa Turbadites could turn out to be remarkably similiar.
Would also agree with Fixer in the view that those paying for full service should utilise the house analyst & request a committed opinion. Also, anyone with access to the D.J. Carmichael report from Late February/early March should see if maybe they are allowed to reproduce it here, their guy deserves some credit, as far as I am aware, he was the first analyst to commit in a report the impact of Galoc. Would be interested to hear also if anyone has the views from the Southern Cross analyst, they have been by far the largest net buyers this year, & no ... I have no affiliations with either mentioned, when I plug my broker, I'll make it obvious (& make sure I get a reduction in brokerage for doing so!). : )
Finally, as far as trading this 'spike' goes, I would thoroughly agree with what The Analyser said about the company having 'too many irons in the fire' ... We now know about the recent Cool Energy development & the obviously impending 'Vitol-G.P.C./Galoc development go ahead announcement' but to consider also; - the fact that three further permit applications in the U.K. has been submitted. - A current U.K. block(s) status update may be due. - The Rapid Oil Development field strategy is yet to be explained to the market, (third core key area of interest?). - The stated ambition to acquire further Palawan Basin acreage. - A left-field agreement of some kind with The Vitol Group. - West Linapacan field development with Vitol, (proposal submitted to 25/05/05). - Left field development of any kind. - A full roadshow/broker presentation outlining the impact to the company derived via Galoc. - Surprising field certification results. - Galoc development time-frame brought forward. etc. Yes, profits certainly to be made from trading what may occur over the next 'two weeks' but much, much more to be left on the table if you're caught with your pants down under-estimating this collective management team. : ) I generally trade anything that may offer a profit but invest in very few companies. Nido is by far our largest position, we are investors all the way, we won't be trading any spikes at this early stage of company development & would encourage others to be long as well until/if the point comes that fundamentals dictate otherwise.
Why? ... Because the ducks really are lined up! : )
Anyway, tis late/early, have to go. Good to see some new NDO share-holders/interested parties over the week-end, you especially there Stolwyk, welcome all & good luck. Analyser, good work & interesting perspective with those figures, thanks mate.
Many thanks to all other thread contributors as always. Warm regards to all & good luck in any & all positions. : )
*Assumption Reward Table #8.
Each horizontal development well flows at 7,500bls per day. 7,500bls X 2 = 15,000bls. 15,000bls X 0.22279 = 3,341.85 bopd net NDO.
i) 3,341.85 X AUD$50. = AUD$167,092.5. per day X 91 = AUD$15,205,417. per quarter X 4 = AUD$60,821,668. per annum. a) Price earning ratio application of 7x = market capitilisation of AUD$425,751,670. AUD$425.75m divided by 750m fpo = 56.7cents per fpo valuation.
The table above assumes the following; - NDO field interest remains unchanged @ 22.279%. - The market applies p/e ratio of 7X. - Calculations are net values not revenues or EBITDA. - The price of oil is @ USD$50bl by the time production from Galoc begins, (www.ino.com). - Total daily production of 15,000bls, (the company has stated a projected plateau flow from two horizontal wells at 10,000bpd per well, this conservatively allows for production <). - Although NDO is fully underwritten for it's development costs via the G.P.C./Vitol farm-in, it is assumed that prior to Galoc development, NDO issues a further 100m shares to fund Nth Sea development costs combined with post June options expiry resulting in an approximate capital structure of 750m shares, #. - Net profit per barrel produced after production costs, transportation costs, taxes, royalties & government levies allowing for P.S.C. benefit is AUD$50, (USD$37.96). - No other company asset value is included in these speculative assumptions.
#This factors in dilution for Nth Sea asset development costs but not the value creation generated by. These assets have the realisable potential to produce between 5,000 - 7,000 boe daily production to be achieved within a six month time frame of Galoc producing.
One final simple valuation for those interested for post announcement applications. i)Recoverable reserves @ 20mbls. 20mbls x 0.22279 = 4,455,800bls. 4,455,800bls x AUD$20 = AUD$89.116m. AUD$89.116m divided by 650m fpo = 13.71c per fpo valuation. ii)Recoverable reserves @ 25mbls. 25mbls x 0.22279 = 5,569,750bls. 5,569,750bls x AUD$20 = AUD$111.395m. AUD$111.395m divided by 650m fpo = 17.13c per fpo valuation. iii)Recoverable reserves @ 30mbls 30mbls x 0.22279 = 6,683,700bls. 6,683,700bls x AUD$20 = AUD$133.674m. AUD$133.674m divided by 650m fpo = 20.56c per fpo valuation.
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Subject agm presentation ... Posted 30/05/05 05:03 - 441 reads Posted by Blue Griffin IP 144.136.xxx.xxx Post #607124 - in reply to msg. #607078 - splitview
Evening all. Just thought I would echo other impressions already expressed on this thread relating to the AGM. I was present also on Friday & although I have developed fairly high expectations of David & his team, was left totally satisfied & justifiably impressed by the presentation. Everyone present not only enjoyed themselves, but was left in no doubt of the management competencies, asset value & the future direction of the company.
For me personally, it was very important to meet some of the 'team' afterwards & to say the least, I was very comfortable with what I saw. They were all obviously highly professionally competent individuals, but more than that, they were very human ... honest, decent, conscionable, accountable, disciplined, confident & committed. They all have a very obvious respect & admiration for David. I can't really overstate not just the calibre of this team, but the important fact that they all have a great desire to work together. This team has obviously been hand-picked, they all want to be precisely where they are to achieve together what they have to. I would strongly encourage anyone interested to meet these people & see just in whom you are trusting your investment funds with. I can't say that I have ever been to an AGM quite like it & I believe the response was & will be obvious. I honestly think that NDO is without a dynamic peer & over the next two years they are going to really impress the crap out of the market! : )
I believe the presentation itself was/is far superior to any that I have seen released from a junior in relation to; progress, content, presentation, structure, detail, simplicity, competence, intelligence, share-holder respect & personality. There is so much substance in that presentation, I would simply encourage all that have not yet done so to review it a few times to absorb the direct & indirect implications. I believe it also marks the turning point in the company for serious interest from the more sophisticated & mature elements of the investment community & that the associative risks have been now somewhat reduced relating to speculative perceptions.
ie.-Understand that the breakdown of the 'realisation' assets of the SC14A, SC14B, SC14C, SC6B are not risked exploration structures but proven known resources that were abandoned 9-24 years ago in a totally different economic oil climate without the assistance of today's technologies, practices & understandings. ie.-Mighty ambitious to target six structures by late06/early07 without solid funds coming in at that time from a successful Galoc development unless this 'big fish' is indeed an apex company & there is to be a full regional relationship forged. ie-Rapid Oil Development fields. ie-Stated objective to increase Palawan basin acreage. ie-Reviewed 55 North sea & 7 onshore UK licenses with 3 more bids submitted. etc... These guys have been super busy, show me another company with this potential please I ask ...
Anyway, am obviously still pretty pumped over it so will allow the emotions to settle a little before I post any speculative conclusions/assumptions. Yes, agree that it would have been nice to meet a few of the personalities from NDO threads. Will certainly be an interesting 'two' weeks! : )
Warm regards to all & good luck! : )
NDO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)