Courtesy of BigBiteNow Another note worthy fact from SDX is that the centeal processing facility and 10km long pipeline in Egypt is costing SDX $18.5m for their 55% share. Assuming capex is proportionately shared out then the total facility would be around $34m. That’s a ball park figure but gives a good idea of the cost and it is certainly no deal breaker. There are of course the costs to add to the subsea flowline and drill costs to consider but then Chariot has 75% working interest with which to play with also. Lastly, SDX has made some very good discoveries in Morroco and their success rate with the drill is very good indeed. However, their ; “Total (NET) Proved Plus Probable Plus Possible Reserves” across their entire portfolio, so Egypt and Morroco combined, comes in at ‘just’ 33BCF of which the high return Morrocan assets contribute around 6BCF. I say just because right now Chariot has a proven gas discovery (2C resources) that delivers NET (75% working interest) of 230BCF with major upside potential to come. That’s near 700% more than what SDX has taken minimum 4 years to achieve and they achieved it with one simple concession award from the Morrocan government and a maximum $1m initial cash outlay.
Courtesy of BigBiteNow Good morning. The market clearly hasn’t taken the time to fully appreciate what the Lixus concession and discovery truly means for Chariot Oil. I have seen several references here to SDX, a company I have also invested in and that currently operates in Egypt and Morroco. SDX is currently building a central processing facility in Egypt (not Morroco) with a gross plateau production rate of between 50-60 MMscf/d, with the conventional natural gas being sold to the state at a price of US$2.85/Mcf. SDX has a 55% working interest and is operator in this concession. Whilst the project is delayed there is much excitement for what this project will do to transform SDX’s fortunes by adding what will be circa 5,500 bopd net equivalent production to the business. However, it is in Egypt, a jurisdiction where the 75% ownership enjoyed in Morroco simply isn’t available. Nor is there a 10 year corporation tax holiday on production and the realised price is ‘just’ $2.85/Mcf. In Morroco, SDX operations enjoyed an average realised price of $10.33/Mcf in 2018 with netbacks estimated by Edison at the start of that year at between $8.5-9.0/Mcf range for realised prices of $10/Mcf. [link] SDX are no doubt delighted with their project in Egypt but be under no doubt, it would be a far stronger project if it was based in Morroco and creating far more excitement. With Lixus, Chariot have just that and then potentially a lot more. Yes risks remain and the Morrocan market has to be fully analysed to establish how much gas it can handle and at what sort of pricing but at netbacks pushing $9/Mcf there is plenty of headroom considering that the potential netback is some 315% more than the full prices SDX will be achieving from their processing facility in Egypt. That would be enticing enough if we were simply just comparing a like for like outcome. However, Chariot’s outline plan points towards a 70Mmcf/d phase 1 development. If they only achieved the 70Mmcf/d outcome then i am in, i am present, i am invested, because of those potential netbacks. However, that phase 1 development plan has room to expand to 90Mmcf/d if the deeper Gas Sand C comes in, which carries risk but nothing too testing. A great percentage play given that the 70Mcf/d is enough. But if that weren’t enough then we have phase 2, which can deliver another 90Mmcf/d if the satellites around Anchois come in, and has the added bonus of a low risk Anchois N potentially contributing 238BCF of the anticipated 674BCF needed for this phase (so 35% of the total) and currently holding a 51% chance of success. However, the investment case doesn’t require 90Mcf/d from phase 1, nor phase 2, nor Anchois N, nor the 5 eastern prospects, or even the reported “giant scale prospective resources in the sub-Nappe” that are being reported. All of that is free carried and a bonus. I very much like.
Courtesy of BigBiteNow @topsharepicks whilst nobody outside the company can say for certain that “big farm in” news could not come at any time, the likelihood in Brazil, which i have seen mentioned on this BB several times of late, is that this will not happen until the AP-1 block has been drilled by Shell and its partners. Slide 20 of the latest Chariot presentation is clear ; “Partnering process initiated for a partner to join in drilling to follow a play opening commitment well to be drilled by a third-party in the neighbouring deepwater block” Now whilst there may be a partner out there willing to commit prior to this, it really doesn’t make commercial sense to do so when they can wait until Shell have drilled and establish a better idea of the chances of success. The same is being played out by Chariot themselves with the MOH-B and KEN-A ‘potential’ drills. That Shell drill is not currently planned for 2019. You have every right to believe and argue whatever case you may wish but personally I believe the Brazil angle to be premature and an unnecessary distraction from the Lixus announcement. I didn’t buy in for Brazil but i did buy in for the potential revenues and developments that a successful Lixus will open up. However, I am much more excited about the further Lixus drills and potentially what it could do for opening up the MOH-B play. As an example, the very last slide of the April presentation from Chariot states that Anchois N has the potential to add a further 238 BCF in 2C resources with a 51% chance of recovery. Now that is an internal estimate and Anchois N is till to have a CPR carried out on it but that is included in the works due over the next 2-3 months, and given it has by far the greatest chance of success assigned to it, could well be a very interesting development over the next 2-3 months. To drive that point home, I refer you to slide 8, which is the outline development plan that has been put together to date. Phase 2 currently only considers the 3 satellites that have a CPR on them, and yet it is capapble of delivering a further 90 mmscf/d. However, the slide clearly states ; “Anchois N yet to be audited and may materially impact on a Phase II development” So the satellite with the current highest assumed chance of success and circa 238 BCF in potential gas pay, isn’t even part of what is a potential 180mmscf/d field development plan. Such a development reduces the need to succeed on the satellites and reduces the risk of the overall play. It is these potential game changing positives that will potentially come out in the studies that are due in the next 2-3 months. They have the potential to deliver a very large field plan that will be selling into Chariot’s highest margin market by far and will enjoy a 10 year corporation tax holiday on production, something Brazil doesn’t get near. That is why i am here for Lixus and not those ‘big farms ins’ which are a red herring and a distraction.
Courtesy of BigBiteNow I have taken a position in here having previously bought SDX, so my understanding of the Morrocan gas market is good and their pricing structure makes the Lixus block a very attractive asset. 75% ownership of 70mmboe of 2P resources for just $1m commitment is significant. I do however believe that the talk of the Brazil farm in is far too early because the company and highly likely any potential partner, is waiting for the results of the Shell drill on the neighbouring block AP-1, which as far as I can find is currently not scheduled for 2019. Mohammedia (MOH-B) looks far more likely to be the front end ‘giant’ scale drill that finds a partner and a path to being drilled, but it is not the key reason i have decided to buy in. This is all about Lixus, which is a deal that has and continues to take the market by surprise. From what I can see the next 2-3 months actions are designed to set up Anchois as a commercial find through a series of studies that will turn those 2C resources into proven commercial ones and attract a quality partner for what is an appraisal well. Hence the drive to establish the development plan and the Morrocan gas market. There is risk and I am wary of the managment’s performance to date. However, the asset is that good that on a risk reward basis that I find it compelling enough to take a position. What’s more the discovered resources sit within gas Sand A and B and are to date capable of supplying 70mmscf/d for over 10 years. That is without the as yet not drilled Gas Sand C, or indeed the other 9 prospects that are noted on the block. So everything else could fail and they could still bring home a 70mmscf/d discovery. If as suspected the development plan and gas market studies deliver the sort of returns I expect, then that will be the key catalyst here front end and not Brazil or even MOH-B. They are pure bonuses later down the line, Lixus is more than enough for now. So I am a buyer.
Malcy's Blog: Oil price, Chariot, JOG, Soco, IOG And finally Seems like Malcy fill follow the whole journey to production and to a much higher shareprice with us. Surely he will not be the only one. [link] CharCharChar.png1263x949 194 KB
Malcy's Blog: Oil price, Chariot, JOG, Soco, IOG And finally Vox Markets Versarien, Strategic Minerals, Emmerson and Malcy on O&G - Vox Markets On today's podcast: Versarien sign a term sheet with Beijing Institute of Graphene Technology. Strategic Minerals provide an operational update. Emmerson sign a heads of agreement for 100% Offtake. Interesting chat by Malcy from 38 mins on about the Price of Oil, Fund mgrs, Bond market, Aramco, Chevron offer for Anadarko, etc Talks Chariot from 50:30 mins on
Future Direction Agree PM, it was more wishful thinking rather than the commercial reality of what is going to work best. A good deal will speak louder than any words can and will set us on a new course.
Future Direction dctiffield: I would feel a lot more comfortable with the new strategy being accompanied with new leadership. LB and gang have a long hill to climb to gain any credibility or more importantly trust. I think its too late for any changes in leadership at this stage to be honest. It will also be counterproductive and lead to another period of hibernation. We need a deal that is valued by the industry to wake the market up.
Future Direction You’re right about SQZ and a producing asset. This could transform our prospects here, no doubt about that. I also have the same question regarding who bought and sold that significant number of shares!! I don’t sense it was LTHs bailing out on a marginal SP increase or just savvy day traders cashing in on a bit of news. I would feel a lot more comfortable with the new strategy being accompanied with new leadership. LB and gang have a long hill to climb to gain any credibility or more importantly trust.
Future Direction A well thought out post. Many thanks. I still have reservations about the current management. When looking at how they have performed I ask myself “what would I do?”. A huge opportunity to acquire a producing asset in whole or in part during the relatively recent collapse in the oil price was missed. We had available cash and could now have all or most of our G & A costs covered. It’s what I would have done as an insurance policy. I appreciate that they acquired seismic at a very good rate and drilled at the bottom of the cycle and everything would be different if they’d struck oil. Still unsure if they’re unlucky (multiple times) or just not very good. Time will tell. All the best
Future Direction preciousmaj: Nearly 3 years on and SQZ have a market cap of £312m For Chariot £312m would be as much as 85p per share (+2000%), coincidentally matches exactly FinnCaps unrisked NPV10 for our 70mmboe Anchois develoment project. Who knows, this time next year we might get there!
Future Direction I agree with both of you. This deal does seem too good to be true especially when the share price hasn’t reacted as it should have done. Its important to remember that things can change very quickly on AIM. I remember mentioning the idea of buying into a producing asset to get some revenue at the 2016 AGM (see notes: AGM thoughts). I told Larry that SQZ had a market cap much lower than Chariots but was double at the time of the AGM because they have bought in to a producing asset. Nearly 3 years on and SQZ have a market cap of £312m and CHARs market cap is around £14m - if I had sold my Chariot holding and bought Serica then I would be in a much better place now Long term holders have been forced to be patient but confidence will return in the near future in my opinion. I am still wondering who bought and sold the 100m shares in the last week.
Revival of Kudu Gas to Power project Good find TD
Revival of Kudu Gas to Power project New Era Live – 19 Mar 19 Tech advancements revive Kudu Gas to Power project WINDHOEK – The Kudu Gas to Power project, which has in the past been hailed as the answer to Namibia’s electricity woes, has seen a revival by BW Kudu Limited, who says recent technological advancements as well as a consistent market for reliable... May have an impact on ongoing partnering efforts in Namibia Orange Basin. Chariot retains an option to back-in for 10% equity at no cost after exploration drilling in the Southern Blocks, in return for which the Company will facilitate the partnering programme led by NAMCOR, the Namibian State Oil company. Char Southern Blocks.jpg1349x923 660 KB
Future Direction I agree with what you both say and certainly get a sense that Chariot are about as well placed as they have ever been, if not the best placed to date. It seems almost bizarre that the company sits at 4p, five times less than when I first started investing in them back in 2010 when they only had Namibia and a lot of hope. I can’t help but feel that a lot of the people who would normally invest in a company like Chariot have also be burnt by them too. Char have a lot of negative PR, shareholder shafting and unexplained behaviour to reverse and heal. I sense that only the confidence that partnering brings or an actual drill-bit success will restore the SP to anything like it should be. Whilst Larry should be congratulated for pulling a large white bunny from his hat, he also needs to upgrade his understanding of just how much communicating and connecting with the marketplace is required to counter his considerable historical negative Karma! From a strategic perspective, I am much more comfortable, if not a little excited (or is that relieved) about our new, more balanced portfolio approach, so much better than relying on high risk elephants and the role of the dice. Part of me feels the Anchois deal is too good to be true (I suspect many feel that like at some level), so I greatly look forward to the independent review in a couple of months. I really hope this new lease of life amounts to a genuine transformation. What we could really do with is a couple of significant II’s buying in to the story and cranking up their sales machines on our behalf.