Posted to the wrong board before - reposting it here and have requested the other one to be pulled.
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A combination of modest/inconclusive exploration results, delays caused by mother nature, rig selection issue (reason for issue remains unknown), and conservatively-worded disclosure has led to much frustration amongst shareholders. In many ways, this is understandable as everyone has their own investment objectives and expectation of returns and timelines.
Personally, my expectation had also been higher from 2010, mostly with expectations that PEL96 would have delivered firm results by now from coring and lab. Louise was a sweetener in offsetting the decline at Rayburn, but another exploration success was sorely needed and remains inconclusive at this stage. Thus bringing question of future cashflow into play. Baniyas deal remains elusive, and visible progress at Futurgas can be seen, but funding partner yet to be found. From these issues, it is understandable why the hot money is leaving town since there are so much hot money to be made elsewhere. But similar to the GDP data, it is backward looking. So let's focus on what is to come in 2011.
First of all, let's look at the exploration wells they have flagged for drilling in 2011...
With both oil and gas price recovering, though somewhat offset by the resurgent Aussie, our cashflow position should improve somewhat - especially if Deerslayer is commercial.
Beside the 5 wildcat wells, the key result as far as I am concerned will be the commerciality of Deersleyer. It has the potential to add significant value to our balance sheet as well as cashflow - which will help funding requirements in other projects going fwd.
Even if it doesn't come in, STX has several capital raising options - including using the upcoming independent bankable reserve statement to obtain further debt. Based on my past dialogue with the company, it has been made clear that the last thing the BOD wants is to dilute current shareholders (especially major holders like SA and Goyder themselves) via an SPP.
Moving onto CSG, the flooding situation is seemingly subsiding (from reading announcements by other operators in the Eromanga/Cooper Basin), so we will get to drill our CSG wells this year. One has to assume that the team has learnt their lesson from whatever reason/s that caused drilling to be suspended in July. So I'd expect by some 3P reserves to be established for PEL95/96 by end of 2011.
As per reported, significant progress has been made at Futurgas. However, significant commercialisation risks remains with the project and a funding partner is desparately needed to further derisk the project by moving into feasibility phase. The moment they sign a deal, the hidden intrinsic value of the project will be monetised/unlocked. As with all farmout deals (such as Baniyas), it can take years to reach an agreement. Will 2011 be that year? Only time will tell. As I had mentioned below, the current market is as favourable as it has been for quite some time to get the deal done, given the recent interests in Potash, and the significant rise in all commodities - including Urea.
Lastly, with Baniyas, there is simply no telling when an actual deal will be finalised. But it is closer than ever to being signed, sealed and delivered. I won't quite take the mid-2011 drill date as gospel, but I do believe a farmout deal can be reached by mid-2011 given recent progress, with drill window around late-2011/early-2012.
In all, I'd agree with Hartley's assessment that 2011 is likely to be THE year that STX finally delivers on its massive potential. As such, I have continued to top up in recent times in anticipation of a good year ahead and the fact that it is severely undervalued relatively to its risked NAV.
In the mean time, I may not post again between now and Christmas, so a very merry and safe Christmas, and rewarding 2011 to all.
618
STX Price at posting:
16.4¢ Sentiment: Buy Disclosure: Held
(20min delay)