Thomas Wilson sits on the boards of Magellan and Central and must know the field and the "Mereenie Bonus" better than anyone. Rather a unique position.
press-releases/magellan-sells-mereenie-bonus-rights
From the press release by Magellan -
We believe that the purchase price is attractive to the Company in light of i) the current estimated production from Mereenie, which the Company believes is less than 1,000 boepd, ii) the structure of the Mereenie Bonus, which require sales of hydrocarbons from the Mereenie field to attain 10,000 boepd in order to trigger the final bonus payment of AUD $10 million out of the cumulative potential payments of AUD $17.5 million, iii) the uncertainties related to the timing and financing of a development plan of Mereenie to enable increased production from the field, and iv) the uncertainties related to the ability to execute new sale contracts of hydrocarbons in the current energy market environment.
More interesting than the transaction price, and Magellan's obvious need for cash, is an alternate interpretation of these statements -
i) field is in decline without a major spend on oil, which Santos gave up in 2014. Not news.
ii) alternate reading - perceived low probability to ever attain 10,000 boepd
iii) this is the clanger - Wilson hasn't been presented a plan which he believes sure to attract funding to increase production to 21 PJ/year, merely 5% of Central's 420 PJ target.
iv) ability and uncertainty are worrying words, as no one doubts gas is in demand. Potential obstacles include frac moratorium, cumulative tolls,competing Blacktip gas, and a repeat of (iii) uncertain economic deliverability of Mereenie?
Macquarie are not fools, lends credibility to possible upside. Do they know more about the field than Tom Wilson, who sits on Centrals Board, somehow?
Magellan have grabbed one in-the-hand
Macquarie have doubled-down and settled in for the long haul
Shareholders can be content the cream, if eventuates, hasn't cost and won't be distributed. Unless Central has a side agreement to buy the rights from Macquarie when they are financially able, or the bank lends them the cash to do so.
Fascinating. We look forward to explanatory letter from MD.
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