I'm surprised by this drop and getting a bit disheartened but stocks like this have a habit of driving you crazy.
I agree that it has become more exploration focused but the market is seriously pricing in a huge discount to the current assets which I think is due to the downgrade of Gazelle, but it looks like the market is almost suggesting that the proven discoveries have no value.
Sure there are now 2 ways to look at it, the could produce a gas / oil development at Gazelle (and it even looks from P5 of the most recent presentation as if a couple of the Gazelle wellhead platform could be utilised for wells running into Addax), but I think the more likely solution now is a hub and spoke development of more than 1 discover at the same time unfortunately which will obviously cost more on the capex front.
The fact that the next drilling programme is all exploration also suggests that they aren't sure of the most optimum method to bring the resources to market and therefore the market is discounting them.
I'm not sure there is a need for a CR unless farmouts are off the table (I hope not) as I reckon they actually have $40m as I don't think they have received the $10m from Petroci for the extra interest they farmed into. I couldn't see it on the quarterly cashflow report.
I think this leaves them with $25m (after deducting $15m for Ghana) which if a good farm out occurs then this could cover their drilling plan which if successful could be huge and certainly have a massive impact on the SP, but as others have suggested a good farmout is required.
I don't know if the drop is indicating that farmouts have failed and therefore going down the route of CR, only time will tell.
RIA Price at posting:
7.7¢ Sentiment: None Disclosure: Held
