Kenitra - no partnership in place, nothing pencilled in which is dependent on outcome of RD-1.
Prospect S - partnering is still preferred option. Fund raising allows much stronger negotiating position, come and join us as opposed to will you drill for us. Would allow seamless move to drill Prospect W if S was a success. Commercial discussions still on going, no way was he going to reveal details.
Results will have both immediate and long term implications for the company.
If RD-1 is a failure then there is still the Cretaceous.
Results will be announced as and when Char get them - protocols have to be followed..
The colours on slide 11 of the presentation do not at this stage have meaningful numerical values attached to them - but the green ones were stressed.
The modelling for the drill is based on conjugate Jurassic in Nova Scotia. Dolomitic action, fault lines and Wedge, see slide 8.
If RD-1 failure, no plans as yet to raise furthe funds.
Brazil - results expected back in next two to three months.
All the above is written in good faith, I could listen but was unable to take notes at the time due to circumstances beyond my control.
The call is being recorded, so all that are interested should be able to hear the full presentation.
Main points are as follows:
The RD1 drill is certainly a very interesting prospect and you can see why ENI and Woodside elected to farm in. The presentation was very technical and geologically rich.
1. The drill is designed to test all three key constituents, the presence of a producing 'kitchen', the quality of reservoir and a successful seal
2. Should the drill prove successful, it will significantly de-risk JP1-12 leads and will also highlight interest in JP2 and LKP1A and B. It is likely in the success case that further 3D seismic will be applied to these areas relatively quickly
3. Due to the nature and position of RD1, success will only slightly de-risk Kenitra which is fed by a different but linked oil kitchen, but will not throw light on reservoir or seal properties.
Questions asked (some of, didn't make notes on all)
In the failure case, will there be the potential for a further 'raise' between now and drilling prospect S? No, that is not in the planning and is not being considered. (when pushed further as to whether it could become a possibility) All things have to be considered, but we are not planning another raise
When will the Brazil findings be made available? Chariot have completed their study and it is now with a third party to independently verify the findings. When pushed Larry offered up 2-3 months as a time frame, but no firm promises yet.
Has ENI or any other entity entered into any form of deal or agreement regarding Kenitra in the success case of RD!? No, if we had, this would have been notified via RNS.
Is it Chariot's preference to partner up for the Prospect S drill? Yes. There is no solid agreement as yet, but the recent raise has significantly improved our bargaining position. David Brecknock is doing an excellent job in partnering, but I am not prepared to go into any details about that at this time.
Unfortunately I cannot make the conference call , however I hope they put a recording on the website and I look forward to listening over the weekend.
I too hope they explain in some detail how the information from rd1 will help de risk the kenitra prospect.
In addition, I hope they clarify the funding status for kenitra, does anybody have an option or some right to farm in, as kenitra is described differently from other prospects.
I would appreciate if somebody could also ask about the status and results of the Brazil 3D seismic results.
It is really hard to predict how SP will react to a discovery, key will be how the RNS will be worded and if the market will understand the full scale of a discovery including the derisking impact on our prospects within the surrounding acreage. We have 1.25bnbbls upside potential following RD-1 (net to Chariot!) - of course we can not expect a 100% success rate on follow on prospects but I believe 40% to 60% would be reasonable. If we value only 10% of our net upside potential on top of our share in RD-1 @ US$5/bbl that would be worth US$1bn or 188p per share. ((77mmbbls + 125mmbbls)*US$5 *0.72 / 385m).
Unfortunately I will not be able to participate in the Investor Conference Call @ 11.00 am this morning, hope there will be a new presentation as well!
Imo.. there are far more factors/potentials in play than to only measure against industry CoS, which remains same regardless of PoO or if Del Trotter was the operator. Far more here than a simple wildcat. Also personal circumstances and broader pf mix eg: as yesterday I decided to participate in the placing because of changed circs.. nothing to do with CoS or changing potentials.
How do you factor in that Eni have chosen this op above many others in this mkt.
For me at least, a double on today's SP will be a great result plus all the expanded potential, I can live with the downside.
The Risk Reward ratio can be expressed as a valuation as follows but it is down to what you see as the min-max impact of failure or success of a single or multiple drills.
For me it is 76% chance of failure of RD1 drops to 7p = 5.3p
+ 24% COS on first drill increases to 45p = 10.8p
Total price = 16.1p + notional value on other drills but I am looking at whether I want to investNOW for this 1st drill.
The current SP is less than 16.1p so I would buy. If the SP is above 16.1p then the Risk-Reward value says don't buy and await drill result before reconsidering.
The truth is we don't buy shares in an oil company hoping they don't find oil.
However most drills do not find oil. Even Saudi Arabia took seven drills to find it.
Chariot have done everything they can to find a great prospect and the oil majors were all wanting to get in but Chariot chose ENI not because they offered the best rate but they offered the best expertise. Especially for this rock formation.
SO we have 24% COS then 50% with ENI hopefully. Wht we do know is that if RD1 s successful our neighbouring licences COS jumps masively beyond 24%. All we have to do is to be patient.
Agree there really is value considering upside and downside potential of shareprice compared to CCoS and obviously outcome is not guaranteed hence the massive upside potential. Re: RD-1 - 50p would be worth US$3.5/bbl I believe US$5/bbl would be more reasonable. (71p), then we have 15 times greater upside potential from our surrounding acreage (to be discussed tomorrow), should have some impact as well?
Re: "S" I think both scenarios a & b would lead to a higher shareprice towards drilling in Q4, the question will be if we will drill Kenitra afterwards in 1Q19 and if we will be able to continue our strategy of limiting the downside potential while having the opportunity to participate in the great upside potential..
TD, the problem is we do not know what the terms of Prospect S will be by the time the results of RD-1 are released.
They will be somewhere between:-
a) no further outside involvement and we use the fund raise and keep our 65%
b) the fund rise is used as a lever to get a really good farm out deal, hence conserving some or all the fund raise but reducing our 65%.
The market will want to know what the UNCOMMITTED cash level is when the result of RD-1 is released.
Assuming the CCoS of 20%, that gives break even odds or reward:risk of 4-1.
If the odds are above that then you have value, below that are you are dicing with long term financial ruin if you keep repeating the process - though you might get lucky!
So working at the 90% confidence level.
I would expect the price on Rd-1 failing, whatever the conditions are re Prospect S, to drop to no less than 5p.
So given 14p today, that gives a reasonable max risk of 9p downside IMO.
So the break even rise in terms of 9p would be 36p, giving a share price of 45p.
Allowing for the dilution due to the increase in the number of shares but the increase in the price of oil after the last assessment was given and the knock on effects on the rest of the portfolio; rises of 45p, even 54p would IMO still be reasonable at that confidence level.
So as part of a well balanced portfolio I think there is value. Just because there might be value does not guarantee a positive outcome though.
Welcome to the board, I haven't seen you post here before and I'm a little cautious as to your motives tbh.
Anyway the CoS is 24%, you could have done a little research and found out but I suspect that you already know as you are a shareholder after all - why would you invest in a company without doing some due diligence?
The chance of success seems low but its actually pretty good for the industry. Also it has been mentioned on this bb previously that ENI have a 50% success rate as of late, which bodes well as they have probably done a little more research on the potential than you have on the company before you invested. The third party validation from ENI and Woodside confirms CHARs view, these entities wouldn't be wasting their time and funds to drill the potentially huge prospect without thorough analysis.
No one needs you to come here and highlight the downside as it has been discussed, others are able to do their own research and come to their own conclusions.
The time to be worried has long gone IMO - where have you been for the last 5/6 years?
We are drilling a potentially transformational well that could multiply our SP many times over, on the downside we could lose c.50% on today's value as our cash value would be c.7p after the fundraise is complete. The upside is huge and the downside is limited.
We have another drill to look forward to in Namibia in Q3 2018, the losses will likely reverse leading up to this drill anyway.
If I was thinking about investing today, it would be a no brainer - my £100k investment could turn into £500k as minimum upon success at RD-1 or it could reduce to £50k in case of a duster by the end of April. However, in anticipation of the Namibian well the SP would likely get back to these levels at minimum and I would be able to take the £100k and walk away without incurring any loss.
There is still hope if Rd-1 is not successful, the BODs and institutional investors are fully loaded and will have to ramp up the PR if they want to walk away with a return.
The timing has been off by the BODs, the company cannot ramp up PR now as it would increase the SP and everyone will sell to derisk or to use the funds to participate in the open offer. Either of these outcomes would have a negative impact on the SP.
It will be interesting what Larry has to say tomorrow during the Investor Conference Call. The call is '' to discuss the implications of the Rabat Deep 1 well on surrounding prospectivity'' - they have ensured that we stay on topic this time around LOL but it will be interesting to hear about the impact on surrounding acreage upon success or failure.
Whilst is natural to focus on the positives, is it good practice?
A well known consequence of this behaviour on bulletin boards is sometimes referred to as "the echo chamber effect". All people end up hearing is their own views coming back to them from others, hardly a recipe for critical analysis.
When it comes to Chances of Success there are three values that are important before the drill reaches target - the Geological, the Economic and the derived Commercial.
When Geologists talk to Geologists they use CoS to mean the GCoS by default.
When investors are looking at reward:risk they MUST use the CCoS, which by definition is always less than the GCoS.
For wells that are Geological successes, the last analysis I am aware of showed that 75% of them globally were found to be Commercial succeses.
The locations of the two drills off-shore Morocco and Namibia are IMO better than average in terms of location, regime....., so allocation an ECoS of between 80 and 85% to both would seem reasonable.
Prospect S CCoS=29%*83%=24%
So the probability that BOTH fail=(1-0.2)*(1-0.24)=0.61 or 61%
So the most likely scenario you have to look at is the downside on Price of both failing - that allows you to assess the WORST risk to your bank. If the worst case doesn't raise issues then everything else is a bonus.
Then you should have a look at the rewards of one or the other or both succeeding.
At my average price, I think the potential rewards, compared to the downside risks and allowing for the CCoS justify holding my shares.
Others will have a different average price and view the same data in a different way.and act differently,
Maybe as a director of a PLC you'd know to look at the latest shareholder presentation on their website. You're probably about the only one that doesn't know the number. How about a bit more research before you start telling us what to think.
Maybe having ran a PLC I have learnt to be cautious where PI's are concerned as many of them have a tendency to only hear what they want to hear which is why I asked about the % Chance of Success. This factor is one of the critical elements and whilst the data everyone is providing about the amount of oil and potential value is very interesting and exciting, we should not lose sight about the chance of actually extracting it.
Its a bit like not getting too excited with the lottery because the jackpot is high and you have purchased a ticket.
So back to my original question, does anyone know what the chance of success is? I know i read some figures some time ago but cannot locate them.
Sid, I dont think anyone is getting ahead of themselves!! We all know that the short term down side of a duster on RD1 will probably be sub 10p (depending on where the SP is if and when that were to happen). There is very little to discuss on that particular topic. It will drop to where it drops to and will bounce back when it bounces back, based on the next drill and Brazil news (amoungst other things).
Is it not only natural for investors/punters to look at the potential upside or success case scenarios when there are so many permutations and catalysts for success, particularly when the COS is actually relatively high for a drill of this nature??. If youre not interested in what these are, thats one thing, but to discourage others from discussing or highlighting what they are seems a little odd.
Anyone...some advice please...we spudded today yes?
Or is my thinking/terminology wrong.
I was kind of hoping that the share price would go up the day that the ship got on location & started drilling & yet it's dropped. I realise that the 'offering' & dilution has hit us a bit hard but weren't we all quoting/expecting 30-40p on spud. Am I wrong to be a tad worried or does everyone else think the current price is about right considering the situation.
RD-1 alone worth > 70p in the success case (according to Finncap), makes 1125p upside potential for the 15 times greater Jurassic follow on potential AND RD-1 may also derisk Kenitra (Cretaceous) which we target to drill in 1Q19, worth 313p in the success case + upside potential, RD-1 is a huge impact drill, if the market acknowledges the surrounding potential - to be discussed on Friday (Char loves a ...) - we should be trading > 200p in the RD-1 success case imo..
not to forget - prior to Kenitra we will drill prospect "S" in Namibia in 4Q18 worth 269p in the success case + upside potential - so virtually no risk on RD-1 if you expect same or higher shareprice caused by anticpation Namibia spud, Risk/Reward Ratio could not be better on RD-1!
Commencement of Drilling of Rabat Deep 1 Well, Morocco
Saipem 12000 drillship has commenced the drilling of the Rabat Deep 1 well.
Operations are expected to take approximately 50 days and further announcements will be made as appropriate.
Chariot Oil & Gas Limited (AIM: CHAR), the Atlantic margins focused oil and gas exploration company, is pleased to announce that the Saipem 12000, a sixth generation ultra-deepwater drillship, has commenced drilling on the Rabat Deep Permits in Morocco (Eni Maroc B.V. 40% (operator), Woodside Energy (Morocco) Pty Ltd 25%, ONHYM 25%, Chariot Oil & Gas Investments (Morocco) Limited 10%).
Investor Conference Call:
Management of Chariot will host a conference call for investors at 11.00 am (GMT) 16 March 2018 to discuss the implications of the Rabat Deep 1 well on surrounding prospectivity. Dial in details for the call are shown below and participants should request to join the 'Chariot Oil & Gas Investor Call'.
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