Well said! You seem to have a very good understanding of what has just transpired with Magellan. It seems that some posters here only want to hear what they want to hear! Wouldn't worry too much about what they have to say however Anonymous1 is a pretty switched on poster in this forum.
The Magellan asset acquisition was a huge mistake IMO. CTP got little out of this deal that was any good. Magellan became our largest shareholder (by far) for giving up some pretty poor assets of any value. They were the clever ones for sure in this deal.
As for our MD, well what more can i say that i haven't said already about him in the past.
There are many major concerns here for CTP about this deal. Any down time during production for any reason is a BIG problem for all the debt we are carrying. It isn't just that, but we have been put at huge risk by many things that could go wrong with this acquisition by CTP that can endanger us such as needed to remain solvent at all times.
The Dingo gasfield for instance has tight gas sands and are very low producing wells. Some of the wells that were drilled were dry! That means the field was not filled to spill point. They were drilled decades ago.
Magellan said in one of their releases that selling Dingo was opportune as it no longer needed to put up the future costs associated with drilling more wells in this field. The future wells will have to be horizontally drilled and perhaps fracked. We are talking about $8M for horizontal drilling each plus the very high cost of fracking if they need to do that.
This is a huge gamble to take on for just a 19% IRR! I keep shaking my head every time i think we did it for just a 19% IRR!
It was IMO 100% the wrong decision as it makes no economic sense to me to take on all this debt and the giant risk that anything could easily go wrong with the development of the Dingo field and pipe line as you mentioned that could add significantly more costs or delays! CTP knows all about delays, that is for sure, and we all know that! Really this was a mind blowing deal and i am surprised that the BOARD of CTP approved it!
I am sure however that the MD of Magellan is absolutely wrapped with this outcome as are their shareholders. One can only say well done for them but not for CTP shareholders IMO.
It did give Magellan an 11% shareholding in CTP which IMO stops a potential takeover of CTP by anyone else except Magellan. So any hope or expectations of a takeover in the near future have most likely been dashed. I do not agree with that either.
This DEBT is a real significant worry and will not go away anytime soon especially the way CTP is moving forward. Really God knows how many years it will take to pay it back that is if everything goes to plan and that does not happen with this company.
Surprise-1 we were told by CTP directors was payback in 9 months. It will take us 10+ years perhaps to pay all this debt off with the production from low producing gas wells if we cannot get higher flow rates from future wells.
Really, did we need this high risk gamble for the little we received? If it goes wrong for any reason then we may just turn out to be another failed company with a lot of debt that Magellan can snap up for very little in admin.
One can only hope for the best but it should have been for better assets to be put at this level of risk. If we had of acquired the Mereenie oil field then i would be singing a different tune!
We really need to be aware of all the big risks here associated with this deal that gives us so very very little!
I wouldn't count on any rocketing share price rise from this deal and view what we have seen so far as just a dead cat bounce while it is being analyzed. Today we saw some analysis from Carmichael's and the share price slipped. IMO expect it to go back from where it came from!
CTP Price at posting:
45.5¢ Sentiment: Hold Disclosure: Held
