Let's just be clear about the Artemis farmin process. I wasn't...

Let's just be clear about the Artemis farmin process.

I wasn't at the AGM 18 Nov but there the presentation document was released to the ASX. A copy of it is here.

http://www.meoaustralia.com.au/icms_docs/59439_MEO_Annual_General_Meeting_Presentation.pdf

If we refer to page 9 of the AGM document a time line is shown which clearly outlines the farmin process from early May projected to the end of Feb 2010 as follows.

The Artemis 3D seismic survey was acquired in March 2009 to supplement the original 'vintage' 2D data.

May - July 2009 - The data room was opened for prospective farminees to view existing data.

July 21st - MEO advised that the closing date of the data room would be extended to August 14th. The extension was made to grant a request by several companies to give them an opportunity to review the entire data set.
This included new data provided by the seimic and bio-stratigraphic data from Zeus-1.

August 14th - MEO advised that the updated data had been sent out to the 20 parties that remained in the farmout process. A revised estimate put the MGIP at 20Tcf (12 Tcf @ 60% Recovery Factor).

The data room closed and indicated offers were expected by by 31st Aug and farm-out expected to be concluded by 30th Sept.

This unfortunate commitment to a deadline was later to prove a thorn in managements side.

Sept 1st - MEO announced the period in which to submit indicative offers was closed. The Company also said, again, that they were still on track to complete the transaction by 30th Sept as previously advised.

Sept 25th - MEO advised that while considerable progress had been made, the negotiations remained incomplete and were now expected to be concluded during October.

From the timeline it can be seen that bids were looked at and negotiated until mid Sept when a decision was made and initial commercial due diligence discussions took place. There appears to be an overlap between these discussions and the continuing farmin negotiations (until the end of September.

To me this indicates that keen competition was in play between rival bidders.

13th Oct - MEO confirmed that, whilst all parties were working towards the 30th September timeframe to close the deal, it turned out that negotiations had become more detailed and required additional time. MEO advised that negotiations remained ongoing.

20th Oct - MEO announced that it had selected its preferred farminee and negotiations were at a very advanced stage. The final stages of the due diligence process were scheduled for the week of October 26th.

Meetings to secure the requisite approvals to execute binding agreements were scheduled. The parties were anticipating the execution of binding agreements ahead of MEO’s AGM to be held on 18th November.

A condition of the farm-in negotiations required the identity of the preferred farminee and the terms of the farm-in agreement remain confidential until the final approvals had been obtained.

16th Nov - MEO advised that the preferred Farminee is a major international petroleum and energy company. They also said that the reputation, size and independence would provide substantial long term benefits for MEO.

MEO also stated that commercial due diligence negotiations to finalise all outstanding commercial terms were concluded during the week of October 26th. This is shown on the timeline and proves that management had fulfilled their obligations to shareholders that the deal should have been completed by the 18th Nov AGM.

Looking at the timeline it shows that the farminee pre-bid and negotiations approvals were undertaken by the farminee management. The deal then had to be ratified by the farminee's board of directors. I believe MEO thought that this meeting would take place before the AGM but learned at the last minute that the farminee board would not sit until mid December.

It is ponderous why the time lapse (as they had a meeting mid November) but perhaps they also needed to finalise some in house approvals - or maybe just make a final play against MEO to play on MEO's tight deadline.

18th Nov - MEO advised that it successfully placed 59,898,385 million new shares (14.35% of its issued capital) at $0.45 per share to Institutional and Sophisticated Investors.

The funds from this placement together with existing cash reserves ensured the financial commitment involved in the planned exercise of the drill/drop option for Artemis. This was because MEO needed to make an irrevocable commitment by 31 Dec 2009 to fund the drilling of the commitment well in order to retain its 70% interest.

Management viewed this capital raising as an appropriate risk management measure to provide certainty for shareholders while the WA-360-P farm-in is being finalised. Assuming the farm-in has been finalised the capital raised will be used to advance MEO’s existing projects and to secure attractive growth opportunities.

Management considered offering existing MEO shareholders the opportunity to participate on the same basis through an SPP, but, because sufficient funds were raised through the placement, immediate capital requirements had been met ahead of finalising the farm-in.

This is the clinching pin in the farmin process. Because of the delay by the farminee on the one hand, and fractious shareholders on the other, management took made the bold move in a CR. The success of the move was impressive, not in the least the fact that the targeted investors showed high confidence in the company.

The fact that the retail investors were not included, whilst disappointing to some, meant that the shares were not further diluted, the time frame of a SPP was avoided and the goal of the commitment to drill was secure. Also when the farmin is finalised MEO now has sufficient funds for further projects in their own right.

As it turned out long term investors in MEO were able to increase their holdings at a price lower than th CR price of 45c anyway.

Today - We are waiting for the farminee decision to be announced. However, we have the funds to commit to drilling if the farminee bid falls through. The commitment to drill fulfils the obligations to the permit associates but there will still be room to find an alternative farminee or go it alone.

2010 - The time line shows that Regulatory Approvals, including FIRB, will need to be processed to finally put the deal in place. This is expected to take until the end of Feb (according to the timeline). In the meantime the well site will be selected and prepared for drilling, out of the cyclone season, later in the year.

There has been a lot of negativity about this process on the MEO forum and elsewhere on the HC site. Whilst some statements released by management were put together in good faith I believe they could have been worded differently. I believe management tried to meet their deadlines but the offers they had needed more time to consider and negotiate than originally thought.

Who knows what the end result will be but I have always believed that long term holders will be rewarded by their patience. To send insults to MEO shareholders in the HC forums is ok, we can take it, but I think everyone needs to remember that a lot of traders have made a lot of money on the MEO rollercoaster. Posters in the MEO forum have indicated this a number of times.

It is not the long term holders who have driven the swings and roundabouts. We are just waiting confidently to see our research in this company realised.

As far as management is concerned, they cannot drive the share either. What they are doing is taking the helm and steering the good ship Artemis as the operator. The associated companies gave up that right when the took on MEO as the operator and looked to us to do the deal for them. Whatever happens, if successful, Artemis will be a bonus to everyone concerned.

After all it might be said that Artemis has potentially 10.8Tcf of recoverable gas.

I believe management have done their best for everyone concerned. Maybe some things could have been managed differently but the end result will be the judge. They have done the hard yards and made some hard decisions.

All will be revealed soon:))

These facts have been researched from the MEO website and reproduced here. Additional comments are my own and can be scrutinised when you DYOR.