You are correct that the Barry roe reserves are undeveloped contingent resources 2c resources.
I do not believe that most readers understand the very subtle differences in the reserve descriptions which is why I described them as undeveloped proved and probable reserves.
You should also be aware that the Barry roe field has six wells drilled to date and has an independent report on its recoverable oil volume estimates.so this is not just Pvr promotion material.
The hurricane Energy web site states the conditions necessary to convert Contingent resources to Proven reserves.
Reserves are the part of resources which are commercially recoverable and have been justified for development, while contingent and prospective resources are less certain because some significant commercial or technical hurdle must be overcome prior to there being confidence in the eventual production of the volumes.
These are resources that are potentially recoverable but not yet considered mature enough for commercial development due to technological or business hurdles. For contingent resources to move into the reserves category, the key conditions, or contingencies, that prevented commercial development must be clarified and removed. As an example, all required internal and external approvals should be in place or determined to be forthcoming, including environmental and governmental approvals. There also must be evidence of firm intention by a companys management to proceed with development within a reasonable time frame (typically 5 years, though it could be longer)."
After the recent placing and farm out LOGP has 611 million shares in issue and 10% of Barryroe with its 340 million bbl of proven oil and a farm in partner to drill three wells and three sidetracks . The current share prince values LOGP at $0.36 per bbl of independently certified proven and probable oil reserves undeveloped.
Usually valued at $5per bbl at development stage. So huge upside here for a field which already has six wells drilled on it.
Lansdowne Oil & Gas Plc (LON:LOGP) has raised £900,000 through a share placing, giving it sufficient capital to cover its costs for the Barryroe project until the groups Chinese farm-out deal completes.
Some 69.2mln new shares are being sold at a price of 1.3p each. The placing investors will also receive share warrants, which will exercise at 1.3p also.
The Irish oil firms farm-out deal sees Lansdowne selling half of its stake in Barryroe (its interest reduces down to 10%) and the transaction is expected to close in the third quarter.
In Friday mornings statement, LOGP told investors that it will now have on-going working capital though to mid-2019.
READ: Providence Resources brings in Chinese group to develop Barryroe
As well as the share placing, which has been organised by Brandon Hill Capital, the broker has also agreed to convert a £326,911 debt into equity (at the same pricing as the share placing).
Similarly, the LC Capital Master fund has agreed to switch a £680,000 of loan note debt into Lansdowne equity. It retains a holding of further loan notes, and it has agreed to extend the maturity out to June 30.
It will ultimately see Brandon Hill hold 12.66% of the company, while the LC Capital Master Fund will hold 29% of the company.
Last week, it was announced that a Chinese consortium, backed by state funds, would acquire a 50% stake in Barryroe, taking 10% from Lansdowne and 40% from operator Providence Resources PLC (LON:PVR).
The transaction sets into motion a series of operations that are expected to lead to the fields development. Specifically, the farm-out deal commits the Chinese to fund a three well drill programme, designed to further appraise and test Barryroes reservoirs.
The Chinese will be responsible for providing non-recourse financing to Providence and Lansdowne, with the loan repaid from future production volumes.
Finances on a better footing
It transforms the proposition for both Lansdowne as well as the financiers that supported the group through the austere period as the company held out for a farm-out deal.
In todays statement, Lansdowne chairman Tim Torrington said: Following the recent announcement of the Barryroe farm-out to APEC and the Chinese consortium we have moved quickly to put the company's finances on a firm footing and I would like to thank all our existing and new shareholders for their support.
I would particularly like to acknowledge our major shareholders, LC Capital and Brandon Hill Capital Limited for their support of the company through the difficult period caused by the decline in the oil price.
He added: With a clear pathway forward on Barryroe and continued improvement in the oil price, we can now return to focus upon value creation"
In answer to your question: Yes and today Mamms :-)
They did some b/s tidy up too with those loans conversions into Equity, which is useful...and a vote of confidence from the lenders too.
While smallish in value this raise is still punchily dilutive versus the total current value of the company. But hopefully this 1.3p sets a base for the s/p from which it can now move back up over the coming months.
Jimmy has kindly already outlined the - very compelling - potential value in the medium term here and with funds now in place for a decent period of time into the future I'm comfortable to sit and wait.. indeed at these s/p levels I'd accumulate if I didn't have my fair share already..
So anyway, back to the original question. When will logp have to raise? I expect they are going to run out of road soon - debt without income is ruinously reckless. I expect the SP weakness reflects the need to raise sooner rather than later.
I hear what you're saying Jimmy but that's a medium term strong buy from you, I suspect? .. as I said Friday I understand how this went to 1.5p and understand it can go lower from 1.5 p in the short term .. and it has indeed gone lower again today . And could of course go lower still .. hopefully it doesn't but for those who bet on such stocks regularly - eg me - it won't surprise them if it does go lower again, I expect ..
Lansdowne now have a carried interest for three wells and sidetracks that will most likely be used as future producers in a field with independent certified recoverable oil of 340 million bbl. the purpose of these next wells will determine the location of the field production wells.
With 34 million bbls of oil valued at $5 per bbl undeveloped its worth 23 p per share , even allowing for dilution for an equity raise this is an extraordinary investment opportunity .
Yes logp needs cash, but its just to keep the lights on, no drilling costs to finance.
Strong buy .
Good to see some directors buying to validate the opportunity.
this has gone back to 1.50p ish.. and bad - short term at least - shout by me to say buy around 2p .. oups and apols. (I'm in it with you all too of course and having bought more higher I'm now back to overall flat )
10p seems a long. long, long way away still Jimmy? ..
.. indeed I now understand that this could go lower again given the timeframes going forward and indeed possible raise by logp for ahort term keeping lights on funding....but hopefully little/no lower than this.. otherwise scary more apt than disappointing imho..
PS; Another e.g. that Aim O&G is brutal and getting more brutal with time imho.. but hopefully value will out here in due course.. granted it seems likely to be very hard earned.. generally, wouldn't it be nice if someone decided to strategically buy into Lansdowne to be involved in the unfolding story.. from this very low level the s/p would push decently on up then, I'd expect..
I am waiting for jimmy's analysis as he has better in sight than me , but with logp now having 10% of Barryore and no cash ,and no drill date what are logp share valued at, all being well etc any ideas ?
it has fallen from a post open high of around 2.5p to 1.85 p as I type so scratch earlier boom, alas..
I guess the fact there's no upfront cash included - LOGP is extremely cash shy but has been able to get small loans before to tick over and so will easily be able to now too, I expect.. and keeping lights on/salaries paid costs will remain low, I expect.. others are taken care of- and it needs government/environment etc approvals before completing means this is not seen as immediately compelling as I'd hoped it would be .. but it certainly appears a big step in right direction to me .. also as management point out in RNS;
"With a current market cap of just US$10M, Lansdowne's valuation equates to less than US$0.3 per contingent barrel for its 10% ownership''
at under 2p as I type I see this as a buy still and so mark weak buy but as ever this is gambling and absolutely DYOR
lets hope we get that farm in agreed in the next month then.. This is gambling.. . (further) diluted to oblivion or even go under vrs multi bag if farm in .. thats the bet you're making here.. bets your money, takes your chances...
I don't think the question is answered - PVR will have to plough on if the farmin deal fails. That means they will seek to contract a rig and seek all the approvals from the department etc. In turn that will require LOGP to also commit their portion of the funding. If it were BP, then everyone would be comfortable but precisely because it is a cash poor minnow, they will have to have the money in hand. Stephen Boldy said they would raise in Q1 unless a deal was done. They won't wait until 31 March to take a decision and I assume PVR will not stop their drill process simply because they are in negotiations on a deal that is yet to be done (that would leave them very vulnerable). At some point LOGP will have to pull the trigger on a fund raise. My question is when will that happen? Don't get me wrong, I'm hoping every day for news of a farmin deal but we have a lot of false dawns on BROE and so should anticipate they will have to drill it again by themselves.
Has jimmy not, in effect, answered your questiion in his original response post Mams.
LOGP sit on their hands for the weeks / months until they know if the farm out agreement completes or not. If it does they likely get the 5m for the drill as part of it and that drill happens when parties agree it happens.. not too long after agreement reached I guess .. but whenever, LoGP would have a carry so no worries.
If it doesn't complete another farm in partner might be sought and LOGP survive - bridging loan to keep lights on etc - for a while longer waiting to see if success in that endeavour.. only of thats not happening do they have to think about trying and get the 5m from a raise or such like imho.. that might indeed be a big thing to get done, if the can get ot done.. etc..
LOGP holders are hard core speculators, the way you're thinking I'm wondering if and maybe you buy BP and forget about this Mamms..
Jimmy, you make it sound like a done deal but in fact it is not certain. The statement from PVR states: "However, given its conditional nature and subjectivity to final contracts, no specific commercial details are being released at this time. Shareholders should note that there is no certainty that this farmin will be concluded and further announcements will be issued in due course and as appropriate." That's a fairly strong caveat. Therefore I don't think LOGP can sit on their hands unless it is a h2 2019 drill which is what I think it must be. My question is, when do LOGP walk the streets and raise their $5m? The CEO said q1 2018 before Christmas and we're half way through now.....
PVR announced that they had agreed commercial terms for a farm out and given the oil company an exclusive period to conclude legal terms.
If this happens then logp would most likely get back costs and a well carry, so no need for equity dilution.
There is a drill planned and LOGP need circa 5million bucks for its share of the costs. A loan extension to keep the lights on while negotiation is continuing is one thing but they will have to raise money for the new drill. When does that need to happen? Given that they have not been seen in the market yet looking for cash, that strongly suggests 2019 at the earliest for a drill....
It would be usual practice for both par and Lansdowne to farm out together as otherwise LOGP could block transfer of interests in license and drilling plans.
As LOGP are dependent on borrowed money I expects that their lender will keep them afloat till the farm out gets done and they receive back costs.
I've also been following this saga for a long long time, have zero PVR shares, but a 'lot' of LOGP.
I've just run a series of reports concerning LOGP from Companies House and from Creditsafe and the 2016 accounts plus creditsafe report have a note from the auditors stating that there are 'going concern' concerns. This was for the period one year hence from the date of these accounts. I don't know the present position.
Your post here on 30/12 states that LOGP have zero cash and I really think that means that there's nothing of worth but maybe the remnants of a loan from a 3rd party - can't recall the name. I don't know but supposedly this keeps them fluid day to day.
There's a load of posts here, and on London South East, about what their (LOGP's) B'Roe share is worth and I think you had a go at this as well. I agree with many of the opinions which are bandied about but not the ones where LOGP could fail because of this. I've said this before (on LSE as AJED) but raising $5m to cover their 20% of the 'K' well is equivalent to a cup of tea for many Operators and funders and I hope LOGP are doing what they can to solve this. Losing 20% of a given opportunity cannot occur.
I suppose that after all this waffle my real question to you and the ones on here with a sensible opinion is where the hell are they going to get it from without giving everything, or a large % of their 20% away?
I'm also intrigued as to why the appraisal well (K) and the farm-in are separated out by O'Reilly. As I stated on LSE I don't think people understand that this is really the case and LOGP's position ref $5m for the 'K' well will become chicken feed in comparison to this if PVR decide to develop (or further appraise) under the terms of whatever occurs with the farm-in. To me it seems very strange that there's an announcement ref an appraisal well and this isn't tied into the overall farm-in directly. It's almost like a teaser and if it were me I wouldn't sign any farm-in until the 'K' well had been drilled and was successful. That's a long delay and puts to bed the quick turnaround lots of people are talking about.
It is, as is ever the case with a certain CEO, fascinating.
yes I see this and thank you for taking the time to explain it ...
if this is correct and Broe now represents the best value ... should one be concerned about their financial difficulties about being able to stay in the process long enough .....?If this is not a worry should one leave PVR to concentrate on LOGP and Broe
also what is the situation with the other free carry interest which I understand is in some type of near bankruptcy ...
I ask most of these questions just from curiosity ... I feel if Broe works I can more or less recuperate my losses here and this would more than satisfy me and if it does not I do not wish to lose more on this .... It has been the most unusual investment of my life and never has my timing been worse ... I may have lost more elsewhere ... but off shore Ireland is what you call an eye opening experience for me... and I thought I knew or understood Ireland a little .... but not at all obviously ....
I would usually share your concern about another PVR farm out , the difference this time is the new seismic technology announced by Pvr which I believe is a major major technical breakthrough that address the concerns I had for 5 years about Barry roe.
This change in technology would be immediately obvious to so many oil companies that its not surprising that one them agreed commercial terms and asked for exclusively to close the deal. All within weeks of announcing the new seismic processing results.
Thats why I think this is real.
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