north african venture with pcl, page-4

OK, so Cooper is up for US$350k to earn it's 20%.

Thats roughly A$500k, which Cooper can pay without blinking.

What is more interesting is at that point, Cooper have earned their 20%, so they pay only 20% of any drilling.

So lets say they find a couple of juicy targets, and that drilling them will cost about US$15m each (*NB thats a wild-ass guess*).

Cooper can pay their 20% of US$30, in cash. It would involve some blinking and angst ... but they can pay it. Thus, the dilution for a farmin partner to cover the other US$24m will come out of Pancon and Afrex's share (*), leaving Cooper with the 20% they started with.

The usual time frames involved in this (y1 seismic, y2 analyse, think about and do deals, y3 drill) also means that this isnt neccessarily the only deal Cooper can do ...

For example, lets assume that, say, Nido is looking for a partner in Galoc or Kufpec wants to sell down it's interest in Oseil (**). Either of these projects would be creating cash flow before Morocco is ready to drill, giving Cooper an asset to borrow against or issue more shares against when the time comes to pony up for the Morocco drilling.

Similarly, Cooper could bid for some of the new Australian offshore acreage, or buy into Merlin's Perdika country, or something ... I'd guess if they wanted to keep A$7m in reserve for drilling, they could easily buy into another 2-3 greenfields projects at a mill apiece ($17K a day net from the Cooper does a lot to let you sleep at night), and then pick and choose which greenfields project to retain an interest in when the time comes to pony up serious money for drilling.

Ian Whitchurch


(*) Afrex are a private company owned by Pancon's board. The plan was to float Afrex on the AIM ... which still may happen

(**) Both of which are true. I'm trying to find what Kufpec are asking ...