My thoughts, in a roundabout way, on how I decided how I'll vote.
It's worth having a look at what's happening with what is probably the closest analogue to CTP, which is COE. They have a similar sized gas source at a similar level of derisking which they are looking to introduce to the east coast domestic market (they even bought it from the same seller) but unlike CTP, their SP has flown in recent months. They didn't take on debt to acquire their asset which seems to be the big difference, so now the SP has risen, their MC has too and they are in a position to source funding from equity markets, which is what RC is telling us is impossible for CTP. Rumours are that the COE funding deal will be executed within weeks.
COE need a far, far bigger capital injection that CTP. In fact even if you add in the price CTP paid in acquiring the Amadeus fields, COE's capital requirements are still bigger. So why are the markets closed to CTP?
Maybe the market thinks it's uneconomic to supply the east coast through NGP - but if that's the case why has Mac Bank (hardly mug punters) made a strategic effort to control the entire Amadeus? They clearly believe that with the LNG freezers hoovering up gas, the renewables in the electricity grid increasing the need for gas backup, the clamour for pipeline reform and the severe lack of new sources of supply, the Amadeus is worth pursuing.
Whatever the reason the markets are closed, the lacklustre share price alone tells us that RC is right that the market doesn't support CTP to a level that would allow it to raise equity at a fair price like COE. Whether it's CTP's debt load, technical (subsurface & engineering) concerns, or economic concerns, there are obviously big concerns.
Regardless, I think CTP could raise equity - investors would be willing to buy shares if the price was right. They say the market didn't respond last time, but that just means they set the price too high. So we could reject the takeover and raise at least enough equity to stay afloat. But the kicker is when you take into account CTP's current MC, its debt, and its capital requirements, CTP would need to raise so much, in more than one raising, that the dilution would destroy shareholder value far more than the Mac offer.
So to be safe, we should take the 20c offered by Mac. If we reject it and CTP is forced to raise equity, we will probably never see 20c again (at least not without another consolidation) unless CTP has a major TCF-sized drilling success, which I don't consider likely. If we vote no, we probably lose money compared with if we vote yes, and possibly quite a lot of money. On that basis, I do not blame RC or the Board for recommending this deal. I think they have rightly recognised that this is probably the best option for shareholders in risked terms. As RC said, they need to give us the opportunity to vote on it.
However, I don't believe 20c is the true fair value of CTP. I think Mac are being predatory, they know CTP is in a tight spot and they are basing their bid on the minimum they think they can get away with, NOT what they think is fair value. So they gave a base bid of the standard VWAP +40%, then upped it a little bit to get the Board over the line, and threw in these CVNs which, as I have previously said, I consider to be essentially worthless and in fact basically a lure to fool shareholders who are holding out for a ten bagger on upside potential.
So I don't think CTP is only worth 20c. And there is always the chance that I'm wrong about not seeing 20c again even after big dilution. There is the chance PV Deep comes off and CTP discover another 100%-owned fractured reservoir under Palm Valley. There is the chance that on the back of COE's success and the worsening gas crisis, the market suddenly wakes up to the fact that actually, CTP can do it too - then CTP raises equity at a good price and sets itself up for success. There is the chance that pipeline reforms bring the cost of transport down significantly, and tight gas development of the 2C Mereenie resources is effective enough that CTP can supply gas to the east coast at a very competitive price. In the longer term, there's still the chance Oooraminna turns out to be perfect for horizontal frac wells and delivers that TCF-sized gas supply to CTP.
I don't know what RC knows about the economics of developing Mereenie, of ethane problems, of capex requirements. But I do know what Mac obviously think they are manageable, and I didn't buy into CTP and hold for all these years for a pocket money profit. Everyone needs to make their own investment decision based on how much they hold, what they stand to lose and what their appetite for risk is, but I personally am happy to roll the dice on this one. I will be voting NO.
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