Warm greetings to all. : ) For those interested, a few thoughts. To be straight to the point & very blunt ... for those upset and/or disappointed by this unexpected development - cop it on the chin, be objective & assess all direct & indirect implications to this farm-in agreement before allowing emotions to influence any decisions ... Apart from lost personal opportunity, (we've all had plenty of those), I see not too many negatives here.
Very simply, the three big questions; #1 - Is this good for NDO? #2 - Is this good for YGL? #3 - Was this transaction an insiders play reeking with layers of self-interest(s)? : )
#1 - Is this good for NDO? Absolutely. It is a commercial farmin which, excluding the presence of a major, the actual terms of is more attractive than what any realistic upper-case farmin assumption(s) should have been for the SC54. Nine months ago there was no SC54 (remember that). The current market capitalisation only reflects discounted values of forward earnings from the Galoc field (if successfully developed within projected production & economic models). This capitalisation is excluding enterprise values via SC54, West Linapacan, other structures applicable to the R.O.D. strategy, North Sea (Virgo-AIM), Area 1 (co-operative with a national oil company) & Cool Energy. This farmin, for the first time, allows the market tangible, intrinsic, speculative & enterprise values to be identified & applied to SC54.
#2 - Is this good for YGL? Absolutely. A former shell with questionable direction, mediocre assets & the only thing going for it being a (then) semi-attractive capital structure has now overnight officially received the key to a serious 'Blue-Sky' door. Anyone that doubts that statement needs to understand that Coron Nth up to the mid-nineties was touted as a 500-800mmbl+ structure before being downgraded to a more 'realistic/conservative' 100mmbl+ structure. It is therefore possible that P10 estimates for Coron Nth after advanced technical/seismic maturation could be in the vicinity of 250-500mmbls+. Obviously 40% equity in a structure like the Coron Nth for a sub AU$80m company is serious blue-sky potential without extrapolating values to a dozen other structures or the 1.33 million other acres in the SC54 after a seismic program.
Understand that a business plan can be like poker, one never shows nor plays their best cards first ...
#3 - In my opinion, was this transaction an insiders play reeking with layers of self-interest(s)? Absolutely. Let's be honest, this isn't a coincidental fortuitous happenstance event, this is an integral level in a master strategy. Only stubbornness & a little bit of corporate law would/could deny that. YGL's lollipop placement volume & price coupled with the last six weeks of obvious insider accumulation (second tier circle) shrouded & justified by a 'drilling program' & 'results' relating to an inconsequential New Bulong retrospectively keys in the jigsaw all the way back to the AGM motions carried. For many of us, the Petroleum Ventures & Nefco Nominees positions on the register was a flag but a shadow entry at 2 & 3 times their entry price without knowing the game-plan or an inability to identify intrinsic company values presented unacceptable risk for anything other than a blind punt. ie-if the game plan is a pump, you become part of the game plan & pay hard & high for your share as the players dump ... I considered a Coron North farmin a variable as I did CVN at the time but applied very low probability due to an inability for them to mask blatant self-interest profiteering, I was wrong, grossly. This has been a perfectly executed strategy with CVN being the vital smoke & mirror to mask the real game in play, quite brilliant actually. I can't help but smile at the brazenness of this YGL play, their first 5-8 multiples more or less risk free! I like CVN, I think that we will see their own business plan successfully come to play in due time, I have no doubt that they will benefit from the collective abilities of the P.V. group & NDO staff but do think that they may be unrelated/removed from the SC54/Filipino jigsaw, time will tell.
The market has never been a level playing field, it never will be, as junior retail, one has to accept that. We all vary in skills/expertise/experience/knowledge, contacts/relationships, resources, strategies, desires, risk profiles & perspectives but essentially we are here to turn a profit. Petroleum Ventures has simply pooled theirs to achieve maximum personal returns, (simply on a more audacious & grander scale than what is conventional).
As a parallel, the recent NXS.ASX take-over offer by AZA.ASX is a valid example. This is sophisticated corporate architecture at it's finest ... At the least, NXS has now experienced accelerated market capitalisation & full market & media awareness to rekindle & maintain market affections on what is a very high-risk asset base if it fails & a 'fairer' price for stake-holders if successful in turn creating a new entity with existing reserves, production, cash flows, high-impact semi-matured asset base with very balanced & sizable exploration acreage nudging the top of the mid-tiers' capitalisation & potential wise. If that occurred then probably eighteen months down the track, lo & behold, BPT & AZA crop up again in a $1.5B consolidation creating even more trading opportunities, fees, profits & recognition for the house & sophisticated elite of Euroz. : )
Self interest - strategies & profits to serve that interest is what it all boils down to whichever entities are involved. Initially I was very surprised, I personally was expecting a major the likes of Shell, BP, Schlumberger, (etc) even CNOOC but after strong considerations & allowing things to settle a little, I see this as an extreme positive, the doorway for a major after all is still open. They have had ample enough time for advanced geotechnical evaluations & if they (PV) decided that they wanted a bigger slice of the SC54 pie & the farmin is & remains highly competitively advantageous to NDO & if market forces accept it & support them to follow through with this then so be it ... good on them - I will regroup & make what profits I can from this. P.V. are a collection of highly competent, independently successful individuals that have thus far achieved quite remarkable progress, why would one doubt their abilities or their strategies now. I also wouldn't doubt the preparation taken for this event by key players & offshore interests so I wouldn't be surprised to see YGL re-rated very aggressively with placements maybe at 12c & 18c to fund these conditions but whatever occurs, YGL is no longer the company she was. Both companies have equity positions that allow further farm-down but simply NDO currently get's her (60% equity) high impact exploration well & SC54 seismic program for approximately AU$7.5M & a moderate to high probability exists of attracting a second farminee to reduce down to a free-carried 40-45% interest ... that's a pretty damn good result. I think with this as the catalyst, we may see the NDO cap finally taken off for strategic reasons & 22-25c over the next month or so possible with YGL trading initially like a NDO derivative.
A little rough with this one but hey, caught a lot of us unawares & not without reason. Anyway, whatever occurs, it's certainly going to be an interesting couple of weeks! : )
Warm regards to all & best of luck in any & all positions. : )
N.B.- Disclosure & sentiment covered in the above.
P.S. - There are a few individuals here that I would take as genuine if claimed a position taken via prudent independent speculative assumptions but with all due respect CS, you're not one of them! : ) You had & have sophisticated assistance all the way there mate, don't claim otherwise. Good luck & enjoy the coming profits ...
_______________________________________________ NDO net positions 26/12/05-20/03/06 (minus three day lag).
(20min delay)