When Michael Glennon stepped in and took control of Metgasco in August times were tough at MEL. MEL needed funds to advance Odin/Vali and had been unable to raise debt or equity. Glennon already had a combined exposure of over $5m to Metgasco ($3.3m equity and $2m debt) however acting to secure the debt would have destroyed Glennons equity.
Glennon would have run the various options available to them however the eventual option they chose was to take direct control of MEL and work on a plan to protect both their debt and equity. The plan was to take direct control of MEL, stop MEL bleeding cash, advance the Odi/Vali fields and then sell out or down. Odin field is now producing 6mmscf/d and MEL is cashflow positive. Vali needs work which is currently ongoing. Glennon took a major risk funding MEL to drill/connect Odin-2 but it is a risk that has paid off for them.
So what's Glennon/MEL's next steps? There are a few hints in the Annual Report.
- Metgasco goal is to sustainably deliver a substantial and growing central Australian gas production to a market that needs the gas - Plans to appraise the Toolache zones at Vali-2 and Vali-1 are planned in the first half of the financial year and re-mediation of Vali-3 is under consideration. - The ATP2021 permit also has a 3D defined oil prospect called Thaldra which is assessed as drill ready and economically justifiable.
At some point Glennon will want to sell out/down however having MEL being self sustaining provides breathing space. Breakeven for Glennon would be around an EV around $27m. (currently 12m) or 1.5cps.
MEL is a producing company with a positive cashflow, a board aligned with SH interests and decent prospects. Not without risks however some major de-risking in the last 2 months.
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