Granby Oil & Gas Share Discussion Threads

[chelseapaul] 18/3/2008 07:19

well at least thats an exit for me!, i'm sure des will have some views as it does seem to run contrary to some valuations.
With 42% its a done deal.

[ammons] 18/3/2008 07:11

Seems a little on the low side to me.

[deswalker] 18/3/2008 07:07

All cash offer of 63.45p !!!!

[normannumpty] 17/3/2008 16:36

Des, Not saying the charts are not ridiculous, I think they are. But why did they pick on Granby for comparison? I just seems odd to pick a on company like Granby and compare themselves to it.

Norm

[dreggspicker] 17/3/2008 13:56

Main thing is we aren't paying for the rig anymore!!

[deswalker] 17/3/2008 12:36

Norm - Some homework for you. Normalise all those graphs on page 69 of that presentation by the Enterprise Value of the respective companies. Either that or add BP to the list of comparable companies. Without specifying the respective Enterprise Values it's a ridiculous chart.

[normannumpty] 17/3/2008 12:12

It's all becoming clear now:

As predicted £7mm at the end of March. Didn't spot the Mosaic 'default' and the extra £2mm. Concerned that if this is such a good project that Mosiac could't raise £2mm to stay in the game. But I suppose an investment of £2mm for a return of £2.7mm (NPV) on an unrisked basis is a pretty poor deal.

Also noticed the comment that significant cashflow to Granby isn't likely until 2009. This means that most of the revenue is going to Mitsubishi until the loan is repaid. The key to success here is that there is sufficient gas remaining to repay Goils £10mm sunk costs and provide a return on our investment.

Can't see how they can avoid a placing or a 'consolidation'. Other than Burton management have always been distinctly wary at putting their hands in their pockets to participate. Indeed some of them sold shares recently.

Can't see a placing being well received in this market, so I think 'consolidation' is likely favourite option (used to be called being acquired or a 'merger' in the old days). Trouble is who would want the assets?.

My own analysis is that the ideal acquirer would need to look like this:
1: UK Production/cashflow
2: North Sea focus
3: Looking to add exploration and development/production assets.
4: Small enough that Granbys assets would be meaningful addition. i.e a market cap of £100-250mm.

I was was looking at another company as a potential investment and their recent presentation makes interesting reading, see page 69.



Conspiracy Theory number 1:
...why use GOIL as a comparative? there is no obvious basis for comparison? One is a well funded producer and the other isn't. Unless of course they are introducing a 'name' for the investors to remember.

Norm

[deswalker] 17/3/2008 11:49

Just heard back from the company.

- moved over to NPV10 instead of NPV5 because that is industry convention. Financing terms are closer to NPV5 though.

- happy to take on the extra percentage as the numbers made sense.

- still intending to farm Anglesey down further prior to drilling.

- frustrated with share price.

Des

[rapier686] 17/3/2008 09:35

GHH - no GOIL's stake is 'worth' (in an NPV10 sense) £14.2m now costs have been sunk.

So if it goes to plan hereafter then Granby will have made PV=£4.2m overall post tax profit. As you say, maybe the overruns have shown the project to have been a bit marginal and the Mosaic back in not from choice, but because someone has to cough up and they've got £10m sunk in it.

[deswalker] 17/3/2008 09:33

Paul,

The NPV is after all costs.

The £14.2 mill includes all costs that need to be repaid by GOIL and so the £2.71 mill includes all the costs that have historically been paid by Mosaic but now will need to be repaid by GOIL.

It isn't a lousy deal. Look to see how quickly they'll get their £1.9 mill back and how many reserves they'll need to produce in order to do that. They get all their costs back in about 14 months and then they're sat on an extra 10.3% of the project.

Des

[rapier686] 17/3/2008 09:28

£1.9m * 54%/10.3% = £10m, the sum Granby now have sunk in Tristan.

It becomes clear that the mechanism at work here is akin to everyone having a stake in proportion to their equity contribution to date.The project has a rights issue, and as Mosaic can't afford to take up all their rights Granby may well have to step in. I think I'd rather Mosaic found some way of financing their contribution (especially if it attracts healthy interest in the meantime) - having to back into another 10% of Tristan leaves GOIL too tight for cash.

It also seems that the explantion for the £8m free cash in the Feb presentation was a good proportion of the overrun whose scale has just been revealed. No doubt there remains potential for further overruns.

It's agreed that upcoming well expenditure is discretionary and can go on the back burner. But substantial management equity or not, I suspect Granby will do a placing to keep themselves out of a weak no-cash position.

[ghhghh] 17/3/2008 09:12

Des

Is the NPV after costs?

So GOIL's stake worth £10m costs (to be paid back) plus the £14.4m?

So what about the 10.3% stake? Does this include past costs and or the £1.9m.

ie GOIL pay out £1.9m and get back £X previous costs, the £1.9m and then the £2.71m?

If not, if they pay out £1.9m now accepting all the ongoing development risks and production risks but only get £2.71m, then lousy deal.


Cheers

Paul

[deswalker] 17/3/2008 08:58

More good news. The new NPV figure is now an NPV10 instead of NPV5 used previously. That's another million they're better off than I realised.

Edit: Following increase to 64.3% I have Cash + Tristan = 61p. Everything else for free.

[deswalker] 17/3/2008 08:45

This look like an excellent RNS to me but the market panics.

Firstly, before the extra 10.3% they are in much better shape than I was expecting after allowing for rig costs and pressure concerns.

Secondly, the Mosaic (I guess ?) deal looks good to me. They need £1.9m and GOIL steps in and gets an NPV worth 14.2/0.54*.103 = £2.71m. Nice business if you can get it. Rapier, you were right they like to go in for loan sharking :-)

True that some parts of the drilling programme might be put back a bit but I see absolutely no need for a placing (whether written in capitals or not). The management team own 35% of the company. They are hardly going to dilute themselves away and I suspect they don't have the money or desire to increase their holdings. They're just taking the long view for the company.

chelsea, you've now joined Norm on my list of people who I beleive are trying to talk the share price down. Hopefully others will be able to help with your questions in future because I won't bother.

Des

[dreggspicker] 17/3/2008 08:41

yep it's that 1.9m

[rapier686] 17/3/2008 08:41

I guess so - and what a time to be looking for cash.

[chelseapaul] 17/3/2008 08:38

Oh sh!t, just re read the RNS looks like only 5m

[dreggspicker] 17/3/2008 08:35

Does look that way

[chelseapaul] 17/3/2008 08:33

Apologies for 1024.
Just reading this RNS, it has PLACING written all over it IMHO, looks like the Mosaic ? have gone skint.
Cash of just 7m! its tight to say the least.

[dreggspicker] 17/3/2008 08:27

Chelseapaul, Just announced, it moved off on the 14th, but has cost us dearly at 4m but it looks like we will get another 10% of the well for buying out another partner for 1.9m.

[chelseapaul] 17/3/2008 08:22

the rig hasn't moved so even more cost!

[dreggspicker] 17/3/2008 08:10

I presume therefore the rig has been moved? or has the ship just gone back to port?

[deswalker] 17/3/2008 07:55

Normand Mjolne now anchored off Aberdeen.

[normannumpty] 13/3/2008 12:37

What "Tristan Company"?, no such thing. This is a standard joint venture.
Payback will be :

1: Mitsubishi loan (£30mm+)
2: GOIL additional costs (£8-9mm) (after payment of ongoing Opex, Tariff and Royalties)
3: Profit, (after payment of ongoing Opex, Tariff and Royalties).
4: Abandonment costs (54% to GOILs account)

As far as I am aware no significant cashflow until 2.

The key facts we need from GOIL are:
How much of the cashflow (if any) do they get in stage 1:
2: Estimated Tariff and Opex costs.
3: Any Royalties to be paid? and if so what type NPI or ORRI and % payable.

Anybody know these numbers?, if we can find out we can have a sensible conversation about value.

Norm

[deswalker] 12/3/2008 22:47

chelsea,

The three JV partners (GOIL, Mosaic & Mitsubishi) have each given a loan to the Tristan Company to pay for the latest costs but the majority of the costs are covered by the original non-recourse loan given to the Tristan Company by Mitsubishi in return for a 30% share in the project. The question is which of these two loans gets paid first or are they paid back at the same time.

You seem to be confusing Profits with Cashflow. GOIL doesn't make any profit until all loans are repaid. However, because they are owed money by the Tristan Company they will receive their loan cash back before they make any profits. Ideally this will be recouped before the non-recourse loan ie by the summer.

The only possible place for a farm-in partner playing hardball is with Anglesey but it's hardly a fire-sale type situation.

The Normand Mjolne is now on its way to the rig with an ETA of 8am tomorrow morning. It set off a couple of hours ago. Fingers crossed we get it shifted tomorrow.

Des