Japes
There are a lot of questions there,but will endeavour to express a few of my thoughts.
This whole mess has occurred because a gas plant was built on a whim. If you were going to outlay even $25m, would you not have obtained independent cert. on your discoveries, carried out the Wanamal 3 D and opened up the farmin? ERM are just as much to blame here. Maybe Wharf had something to say but were voted down(subsequently ERM wanted Wharf gone because it was part of the 100% tenement plan). Seems everything has been done in reverse logic.
Cap.Raising
We all know this is necessary right now, but the amount staggered me a bit. My first read was $10m, which seemed O.K.
The $17.5m is a twelve month program to carry us through to Tranche 2 (most management like 12 month programs). In this business they will take it when they can get it (maybe a bit ambitious for the $10m from us.) 40% dilution is going to be a serious hit to long-terms. There should be no consolidation until the balance sheet is respectable.
Gas Plant
I would be rough guessing that there would be $100m in reserves, producing 7.6mmcf/d on a $38.6m cap.ex If I was a toll company, I would say that a lease would be the only thing I would be interested in on those figures unless you want me to offend you with a buy price. (LPG mods omitted here)
Top-up
O.K. KPMG will address this issue (my bad).
Best senario v's Worst senario = trade-off = EGO v ERM
I'm going to agree with Lani, not so much a cap but a modified 70% to get over the line.
$16.34m better be cheap (farmin $16.34 x100/23.6 = $69m) - EGO shouldering the risk
Critical for me will be the timing of price drivers in chronological order
1. Farmin will be the best because it will kill off the top-up with cash injection. (ERM should get a fair return here)
2. Tranche Two. Not massive price driver.
3. Drilling success (before farmin , don't even take the chance on Black Arrow unless permit commitment)
Management better look after us here.
Conclusion
If this deal goes ahead, a farmin is imperative. A new debt will appear and tenement costs will skyrocket. There will be a bit of work to be done attracting the right people - large area, nearly all tight drilling and proof of concepts yet to be established (AWE, NWE etc) in the Perth Basin, plus of course cash. The asset dilution will be quite substantial so as to minimize EGO exposure to risk (management have said that drilling will be expensive - see what 69.75% exposure cost previously)
In principle, I am in favour of the deal
My opinion
EGO Price at posting:
0.7¢ Sentiment: Hold Disclosure: Held
