Until management state their reasons for the proposed share consolidation we can only speculate on the reasons why but a capital raising would obviously be on the minds of most investors. My first thoughts were for a capital raising for the development of West Linapacan. However, the October 2008 announcement indicates that the current work program is not due to be completed for another 4-7 months and this will only look at the viability of undertaking a fast track development. Any development decision of West Linapacan will no doubt be some time off yet. As stated in the 2009 Annual Report, the focus is on the rapid development of Tindalo and Yakal with the company committed to delivering a second revenue stream to augment the cash flow from Galoc. The development expenditure for Galoc was approximately US$86 M (Nido US$18.2 M) and although I don’t know what the costs will be to develop Tindalo and Yakal, I believe that even with the Galoc revenue Nido do not have the funds to develop them in the near future without undertaking a capital raising. My belief is that the share consolidation is being proposed for this reason. What also caught my eye in the Annual report is the fact that although Nido do not propose to drill a well in 2009, there is an emphasis on similar low risk drilling targets to Tindalo and Yakal that Nido will seek to pursue. Perhaps there will be a well or two drilled in 2009. It would be nice if there was.
NDO Price at posting:
10.0¢ Sentiment: LT Buy Disclosure: Held
