Agreed - one of the risks is TBN shareholders being taken out on the cheap by Sheffield & Co.
”Sheffield/Formantera's interest in TBN. The IPO doc states ~16.7%” - correct but in addition to his shareholding in TBN, Sheffield also has:
1. His direct interest at project level via DW in EP98/117 which has been renegotiated with Falcon for the pilot project so he has 47.5% of the project economics (capex and profits) and retains technical control
2. ORRI: “Tamboran will also grant a 2.3% overriding royalty interest (ORRI) covering Tamboran’s EP 136 (100%), EP 161 (25%) and the Origin Assets (38.75%) to Sheffield for a cash consideration of $22 million.” So he will receive 2.3% of all revenues generated by TBN. Big number if successful, probably US$4bn+.
As I’ve said, I think Sheffield’s plan is to use the NYSE to raise equity capital to leverage his position. He wouldn’t be able to fund the whole basin development himself, at least not without taking a lot of risk and doing it slowly. His take from Parsley was about $1bn pre-tax.
Alternatively, he could try to raise private equity capital via Formentera but this is more expensive + he would have to sell his interest to a new vehicle + it would be limited usually to a 10+2 year hold.
Raising half of the required equity via TBN’s interest is the best option. This can be done progressively at higher valuations as each stage is implemented.
He will fund the other half via DW but once revenues are being generated DW will start to receive a chunky and growing ORRI cashflow. And he can maximise the use of debt at project level, largely guaranteed by TBN, of course!
Massive leveraged upside for Sheffield. Many reasons to keep TBN shareholders happy, it seems to me.
