Trying to get my head around Managments approach should we have another stand a lone project on our hands with SAMO, that itself implies 200 Mmbbls upwards and from an immediate shareprice perspective the bigger the better, but anything that can stand a lone is good news for the Company short and long term..a wonderfull dilemma...
Knowing the nature of shareprice action during periods of little news, one would imagine they would strike while the irons hot and raise very early on ...not only do they need cash for appraisal and other objectives but you can never have enough cash in an uncertain world environment, we have no other income...they would also be raising into higher oil prices and would unlikely be at a discount.
At a guess we would only need another 2 to 3 wells for appraisal, it's over smaller footprint and they carry a lot of information from SNE...they would also probably drill the SOLOO/BAMBO 2 for 1, so we are looking at a 3 to 4 well program or US$ 50-80 Mil, or more if we end up with 50%...IMO its unlikely they would farm down untill appraised, just too much loss of long-term value.
We also have other exploration coming up in 2020 with SNE , plus costs of admin.etc....I'm assuming that finance for SNE is on a 100% basis, some sort of reserves based draw down facility untill first oil, with initial interest payments capitalised, it would be helped by a discovery at SAMO...however FAR would still need cash regardless.
IMO a raise in the region of A$150 could be on the cards, that would be another 500 Mil shares at 30c (as an example), taking us through to around 6 Bil shares on offer , which is a figure I have always allowed for in my calculations anyway, probably come with a consolidation....I use 30c simply because a large strike with SAMO should see us settle around that price and spike above it, a smaller strike then obviously we are dealing with a smaller reaction ..
What are the other options:
1: Sell down or out of SNE, very unlikely untill at least FID and unlikely then IMO, once again giving away long-term value and also our nearest access to cash flow , they would want to see the outcome of PE as well..also our leases in Senegal have considerable upside potential.
2: Reduce our GAMBIAN WI early, very unlikely untill appraised and SOLOO checked out first , again for longterm value reasons. Obviously post appraisal we would have to farm down to help pay for development and would be lucky to retain 20-25% IMO
3: Sell out of everything hand some cash back to shareholders then continue on to GB and KENYA...cant be discounted but it would need to be an offer that took account of some future value less development costs...most unlikely outcome IMO .
4: Being taken over, that's not an option, just a possibility and that possibility would grow considerably with a big strike at SAMO...always good for a shorterm boost to the shareprice but never offer full value, they are trying to get that value themselves.
Summary:
Management have held out for long term shareholder value during very difficult times and its unlikely that would change in better times.
They are looking to grow the Company , so probably best to plan for around that likelihood and expect a CR post any commercial discovery at SAMO, funding issues related to developing oil discoveries are very good ones to have..
There is always dilution when you have no income, be it through raising cash , reducing WI, debt or a combination of all three, and they play out in different ways, with raising having the most immediate effect on the shareprice, the others having more effect on future income.
Obviously all the above is based on a commercial discovery at SAMO ,that is not a guarantee...
Which ever way you cut a commercial discovery at SAMO would be very good news and for me anyway, a large raise off the back of a good discovery is my expectation, so I would have to consider bailing out on a spike and returning after the dust has settled...happily deal with that dilemma at the time...
Anyway just some thoughts, anything but having to endure wading through more responses to certain serial pests...
(20min delay)