Thanks for the info on the Cannacord note - I am not signed up.
Respectfully TShirt - I think Reserve Based Lending (RBL) is very diferent to property.
I could write a diatribe here - but here are three main reasons NEN will not be able to get debt funding in the short term. You can ask any resource debt financier and you will get more or less the same answer.
1. RBL is just that - RESERVES based lending (note NEN is not big enough nor has the diveristy of assets for a corporate facility). NEN will have a contingent resource on success. To get reserves (under SPE definitions), you need a Plan of Development - which requires at least 12 months work (FEED, several appraisal wells) and then govt. approval. Then you have a project that can be financed.
2. Oil is easier to finance than gas (because there is a ready market for oil), but the same theory applies on reserves and POD's.
3. Back on gas, whether you believe it or not, it will be 5-10 years (from now) before a gas development produces any cash. No bank will wait that long or take the inherent risks over that period (especially in Vietnam!). Of course from completion of the POD, the wait might only be 3 years - and with gas contracts in place - that is definitely financeable.
Anyway - I agree - if NEN has success in both blocks, they won't be around long. Success in 105 will mean a long hard road from the finance perspective (which is why $2 is a fantasy). Roll on success in 120 (i.e. oil!!) - that will really be a needle shifter.....
NEN Price at posting:
30.5¢ Sentiment: Hold Disclosure: Held
