Petroneft Resources Share Discussion Threads

[filterwest] 22/4/2014 10:40

Yes me too.

[sh0wme] 22/4/2014 10:37

Can only get a quote to buy 5,000 shares. Anyone else having a problem buying any quantity?

[alyo] 22/4/2014 10:30

Care to elaborate? They could of sold for at least $200m -$250m in any other better deal, right?

[steelwatch] 22/4/2014 10:23

..v4p scrabbling for a foothold..

[alyo] 22/4/2014 10:18

$62.5m for 58.5 million barrels? IS THAT IT? Was thinking of investing but please tell why PTR sold so cheaply?

[katsy] 22/4/2014 09:14

They've paid up to 62.5m to PTR for 58.5m barrels the other 22.5m will be money they've committed to develop their own half of the field. Didn't you see that in DAVY's update. Granted development costs are a synergy that will ultimately benefit PTR, but as DAVY say

"the value transfer to Petroneft is up to $62.5m"

[steelwatch] 22/4/2014 09:13

PetroNeft Second coming?

PetroNeft's announcement on April 17th marks a potential watershed for the company. While clearly flagged and anticipated, the agreed farm-down of Licence 61, which is subject to both shareholder and regulatory approval, will not only eliminate debt (estimated at $30.5m as of December), but provide capital to develop the satellite fields of Arbuzovskoye, Tungolskoye and Sibkrayevskoye. In total, the agreement with Oil India (OIL) will see PetroNeft cede 50% of Licence 61 for up to $85m. That investment comprises an upfront cash payment of $35m to pay all outstanding Macquarie and Arawak loans, a further $45m to develop satellite fields and a potential payment of $5m contingent on achieving production of 7,500 bopd from Sibkrayevskoye within five years.

Shareholder approval is to be sought at the EGM requisition by majority (?) Shareholder Natlata (14.7%) on May 9th with regulatory approval expected towards the end of May. The agreement is subject to a rejection of Natlata proposals to remove the executive management team, thus placing the 'ball' firmly in the Natlata court.

The transaction values PetroNeft's 50% interest in Licence 61 post farm-down at 7.4p per share. Adding in the derived value for Licence 67 in our model would suggest a total risked value of 9.0p relative to a current share price of 6.4p. Narrowing the discount currently applied by the market will require evidence that management can succeed in raising production and realising the potential in satellite developments, the initial findings from which are likely to emerge in 2015.

Recommendation: Buy
Closing Price: £0.06
Gerry Hennigan
[phone]
[e-mail]

[rcturner2] 22/4/2014 09:09

er, I thought we were talking about the P2 value per barrel?

OIL paid $85m for 58.5m barrels, which is $1.45 per barrel.

[katsy] 22/4/2014 09:01

nono how can you include all the development costs to PTR seeing as half belongs to OIL now. DAVY have the same view.

"The value transfer to Petroneft is up to $62.5m"

[rcturner2] 22/4/2014 08:57

117/2 = 58.5

85/58.5 = 1.45

Maybe think before you post?

[katsy] 22/4/2014 08:49

when I said the deal was worth less than a dollar a barrel I was using 132m p2 reserves, ok Davy are using 117m which works out at just $1 per barrel. You tell me if this is a good deal! I suppose it is given the tight situation the BoW found themselves in.

[steelwatch] 22/4/2014 08:43

Oil India farm-in re-starts investment case

DAVY VIEW

The farm-in deal announced just before the Easter break re-starts the investment case for Petroneft. It will now be completely debt-free and will participate in a properly capitalised work programme to develop Licence 61 in the Tomsk Oblast of western Siberia.

Farm-out metrics

Petroneft has entered into an agreement with Oil India which will acquire a 50% stake in Licence 61 for a capital commitment of $85m. This involves a $35m cash payment to Petroneft, a gross $45m work programme and a final $5m cash bonus due to Petroneft if the large Sibkrayevskoye field is developed. The value transfer to Petroneft is up to $62.5m. The deal is subject to regulatory approval, EGM and rejection of the Natlata proposals.

As a consequence of the deal, all debt in Petroneft will be retired and we estimate that the committed expenditure will be sufficient to meet gross licence expenditure over the coming two years.

Re-starts work programme

Assuming the deal is approved by shareholders, drilling will recommence this July. Up to an additional five wells will be drilled on Arbuzovskoye and drilling will also start on the Tungolskoye field. The latter will include a horizontal leg, the first time it has been attempted on Licence 61. This has potentially important implications for the development, leading to possibly much higher production rates and a reduced well count. Growth in production and output has stalled over the last 18 months with current production at 2,400 barrels per day, well short of earlier expectations (management has constructed an export line from the licence with capacity of up to 20,000 b/d). The availability of capital makes it possible to pursue a much more aggressive production growth profile.

Valuation implications

The $62.5m value transfer to Petroneft is equivalent to 5.5p per share for its remaining 50% share in Licence 61. This also values the barrels at just over $1 (50% of 117m attributable to the licence). The value paid equates to our valuation of the two producing fields (Linenoye and Arbuzovskoye) with little for the upside of the Tungolskoye and Sibkrayevskoye fields. However, the group was leveraged and non-producing assets are out of favour at present, so this transaction valuation does not surprise us. We think that the deal will ultimately crystallise value, even with a reduced equity position in Licence 61. Following the deal, we estimate an 11.3p per share core valuation, especially as the group now has the wherewithal to achieve it.

[carlo sartori] 22/4/2014 08:39

I await the Davy Update with interest. If they up their valuation then it would imply that the deal was better than they had expected. If they keep their valuation the same then they probably knew of the deal in play.

Carlo

[seangwhite] 22/4/2014 08:25

SP is relatively muted with no real volume and a lack of any large trades,stand by my share price close prediction of 7.2pGLTA

[katsy] 22/4/2014 08:18

they make very good televisions vyke82, but Samsung are better.

[vyke82] 22/4/2014 08:14

AnyOne can report on LG?

[vyke82] 22/4/2014 08:14

I can't buy big size

[rcturner2] 22/4/2014 08:09

Yes, I agree with that. Should be about £80m market cap now.

[currypasty] 22/4/2014 08:05

i still think this should be double the shareprice on that news

[munkychunky] 22/4/2014 07:17

At the end of the day it's a shame that they have had to give up half of the license - so they also lose half of the revenues.

Yes it will save the company in the short term, but they need to prove they can get production up - which they have consistently failed to do. Anyone remember the pie in the sky projections of a few years back?

Okay they can drill more wells, but that would be necessary anyway due to the natural decline in output of existing wells.

Also, has anyone noticed that the farm-in is not a 100% done deal yet? It still requires regulatory and shareholder approval. Will Natalata approve this - imo no. What is stopping them purchasing a huge check of PTR to veto this move?

The stock already moved up 16% on Thursday, I would not be surprised to see PTR end the day pretty flat - hopefully not, but nothing surprises me with this company.

[trawl] 22/4/2014 00:58

the co was priced to fail
it now looks like a turnaround
hopefully the bod will survive
longterm investors have endured a lot
natlata have bought in cheap
now that deal is out the bod should
show confidence and buy shares with their own cash

[denis056] 21/4/2014 20:25

Gavin I appreciate where the valuation coming from. Based on potential increase in production from the horizontal well (s) there shud be big ramp up in production. 45 million dollars for production and exploration should yield a massive upside over next two years. The bare NAV of last few years goes out the window on basis of potential reserves, the Sib field, infrastructure in place, debt free, experienced and committed BOD particularly CEO and CFO, major local contacts, big brother OIL at our side, share price at rock bottom now, PR created by Natlata tactics. There is no downside from here. I am revising my valuation to 20p inside 2 weeks. 50p by y/e or before. Will take ii's a while to invest but invest they will. Once Putin starts taking his Valium again then the Ukraine effect will disappear also. We have done the pain(big time) now time for the GAIN !!!! Whoosh ........

[spudders] 21/4/2014 20:14

Cheers Steel, thanks for clarifying I don't want to mislead any potential investors.