For
@Davy Boy (hotcopper not linking back to your original post).
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I notice not one of the SM haters offer any opinion/advice on what he could have done differently.......”I’m 100% a SM hater. And for good reason. There are plenty of things that he should have done differently. It might not have been good for the share price at the time but at least we would have been fully informed and able to make an educated decision about our investment. And possibly got out at 3 or 4 times the current sp.
Starting with Mukuyu-1. I was always amazed that he could run and evaluate wireline logs for the first exploration well in the country and not announce the results. To come out at the AGM and in webinars and actually tell investors that he had a preliminary estimate of net pay but wasn’t planning to announce this to the market was the biggest red flag we could have ever seen. We had the likes of kiwigeo calming down the crowd saying this is normal and he would do the same thing until he had more data. But that is absolute horseshit. That was the single most market sensitive information in the company’s history and SM still hasn’t announced it. Kiwi was great for technical info but not asx compliance related discussion.
Mukuyu-1 has now been officially declared a discovery and we know nothing about net pay, the type of hydrocarbons within the accumulation or the reservoir quality. How can investors place a value on it and have this reflected in the share price?
Not to mention the ambiguity in the potential size of the resource. We were at 20TCF prior to Mukuyu-1. Then after hitting nothing in the Dande, Intra-Dande, Forest and Pebbly Arkose you would think that before spudding Mukuyu-2, SM would announce to the market that we’re only targeting 6.7TCF from the Upper and Lower Angwa at MK-2. But no. He comes out and says this prospect still has the same potential of 20TCF despite the fact that most zones were dry at Mukuyu-1! How is that possible? And now he’s putting out market sensitive information to say that he agrees with the Woods Mackenzie assessment that we have 1.3TCF. WTF. We’ve gone from 20TCF before MK-1 to 20TCF before MK-2 to what should have been 6.7TCF after MK-2 to now 1.3TCF. 70% (post government back-in) of 1.3TCF in a high risk country is lucky to be worth 8c to us with 2.5B shares fully diluted. And that’s only after a successful flow test. Our upside has been absolutely decimated.
We’re spending ridiculous amounts of money on these wells in comparison to other companies operating in similar African countries. $30m+ for an onshore well anywhere in the world is astronomical. These should be costing $10m-$15m at most. Where’s all the money going?
We’ve got $8m cash and will need maybe $4m for 3D seismic. Deepening MK-2 and the flow test is going to be $10m-$15m as ridiculous as that sounds. Plus needing more for future exploration. The next capital raise will be at 5c for sure. With more dilutive options just to get the CR away. The hopes of seeing a 50c - $1 share price are gone. And that was the only thing attracting dumb retail investors to this stock in the first place.
Not to mention that we have no clarity from SM as to why we’ve gone out to market for well testing services instead of just locking in our existing subbies. This tells me that SLB probably aren’t interested in coming back. Otherwise they would have just done a variation on their existing contract (at cheaper rates as promised by SM). If we hear that SLB aren’t returning for the well testing or future exploration wells then that will tell you everything you need to know about the real success or otherwise of what we’ve encountered. If this basin opening “discovery” is going to lead to 10’s or 100’s of wells according to SM then SLB will be bashing down the door to get the contract. If they have data from MK-2 to suggest otherwise and we’re being mislead by SM then they’ll walk away. It’s that simple. And that will be the next pivotal piece of information we need to hear. Looking forward to hear how SM is going to put a positive spin on it if we’re stuck with Baker again. No SLB = sub 5c share price guaranteed.
I personally believe that all we have here is some gas shows in tight or poor quality reservoir that is unlikely to flow at economical rates. And all SM is doing is putting lipstick on a pig.
