Hi Dargie,Aim when buying was to sell north of $2. Still applies...

Hi Dargie,

Aim when buying was to sell north of $2. Still applies but subject to independent report views.

Here’s my take on oil share mispricing. It’s endemic amongst ASX oilers, as pricing is heavily based on sex appeal rather than fundamentals. Let me expand.

As a gross generalisation, the mindset of oil investors is a bit different to your average investor. Generally tolerate higher risks, very optimistic nature, many tend to flick around shares more readily and congregate quickly around the latest hot sector.

Seen a couple of attempts to list the most to least “popular” type of ASX oil company (which might correlate roughly to under/over pricing). ROC did a quirky presentation 16/6/08, but the best one was in the Oil & Gas Weekly 29/6/08.

They had 10 categories, rated 7 stars down to 1 for popularity. On the lowest rung with 1star (being least popular) the “Emerging Producers” category. Johns examples CUE, STX, IPM, MOS, EXR, GGP with the comment: Hugely undervalued?

Well, if so, why. My own theory is that once oilers finally get into reasonable production, over time the delusions of grandeur that sustained higher prices during the exhilarating exp/dev OIP build phase, slowly erode. The hard reality of producing oil bites. In reality big and/or sustainable profits are few and far between. For investors, the company slowly morphs from lover to grandma, and interest tends to fly off to the next exciting prospect.

And IMP is unusual within this group. It has never really experienced the intense infatuation phase. They came in with a developed and producing field. Took a couple of years to modernise it, + incremental developments, + now exciting exploration prospects. Granny is morphing into a fresh lover (a bit disturbing I know). The market is not used to such a development, and this very shell-shocked one is proving reluctant and slow to revalue it on this “fresh” basis. Doesn’t help that the transformation has occurred over a period where oil companies have not been fully revalued in line with the increasing oil price, yet all are tending to be marked down with the declining price.

Psychological mumbo jumbo perhaps – but I don’t think goes along way to explaining reality.

It also tends to lead to IPM having a conservative shareholder base for a oiler. Less inclined to force big price movements on speculation, but never-the-less a fairly savy value-driven bunch.

Imo the main reason it hasn’t come up to any inferred offer price, is that in the remote chance the offer succeeds, people know there will be prolonged selling pressure in COE from the new holders. Any 3 month old inferred price is irrelevant. Posted the other day that ironic script t/over offers tending to be short-term value destroyers in this strange market. So imo it’s failure to get to an inferred price is not a good indicator that the majority of holders will think the bid is reasonable or will end up accepting. COE will no doubt claim it does and use the fact to try and shake the tree. Strange times.

PE