Ok Prato. The problem is that our MD committed us to a larger interest in the Total JV in the Georgina Basin and that will cost us money to come up with next year instead of getting a free carry like we did with Santos in the Amadeus Basin.
This Total commitment money is very large and if we drill the Surprise East -1 well now then we won’t have the money to pay for our share of Total JV expenditure. Our MD previously announced that our March 2014 Options will pay for our share of the Total JV. Our stock price is at a low and the options are highly likely to expire worthless in March. So we will not have those monies. The problem is that $10M of the monies in the Bank now was raised recently in a placement as announced for the drilling of the Surprise East 1 well. If the MD uses those Bank monies to drill the Surprise well then we will most likely not have the funds to pay the Total JV costs. He has placed in a precarious position because he counted too much on those options being exercised.
If we were to drill Surprise East now (which is what we should be doing) then as announced by the Company previously, we could have free cash of about $21M in the next calendar year. Too late because we have run out of time as the Production Licence has not been granted yet for Surprise field to produce the money we need for the Total Joint Venture.
IMO we should have been free carried thru the Total JV like we were with the Santos JV but our MD decided otherwise and also wanted to be Operator of the Total JV. It would look very odd if CTP did not have the money for the first cash call to pay our own share of the JV costs which would result in our share of the JV to be watered down ie our interest would be reduced in the Georgina instead of having a free carry.
We have been told by our MD before that our 100% ground can be a Company maker for us especially with the Surprise Field that just requires drilling and a Production Licence. However, we have also more recently been informed by CTP that they want to farmout our Surprise area (which includes our oilfield). I do not agree with this. We have a discovery that is ours 100% already and why farm it out? The answer lies in the Total JV commitment that we now have and no option monies to pay for it. So we have been squeezed into a hard place unnecessarily. It appears that the farmout of the Surprise area is also taking longer than expected and that is why we see no activity.
IMO we should drill Surprise immediately ourselves and keep our 100% ground and water down our Total JV areas if we do not have the monies and just move on with everything! Just hanging like this is not the right economic thing to do.
We have been told by our Company that the Production Licence will be granted this Quarter so while waiting we can be drilling Surprise East 1 now and produce from both wells in the first Quarter of next year.
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