Petroneft Resources Share Discussion Threads

[denis black gold] 23/4/2014 09:33

So far markets seem to be giving this deal a thumbs down..!!! Pity...!!! Why am i still reading about a binding legal agreement been executed within a week.... i thought the deal was done and dusted....???????

[bmw30csl] 23/4/2014 09:10

RCT - spending the cash and increasing throughput of the facilities should increase the 2P value by far more than the cost of the cash - the cash is worth c 50c/2P bbl we have now.

[fistfullofdollars] 23/4/2014 08:55

Perhaps an amature question but I can vote now? What if I then sell my shares the day after I vote will it still stand?

[chris cat] 23/4/2014 08:36

DB - around 6.5p per share - unfortunately. I am still weighing up which way to vote but at the moment I think I'll be going with NAT - purely out of spite for the terrible performance (In my view) of the BOD and thereby the share price They have spent $200m and managed to sell half of this for $62.5m.

[dbarr0n] 23/4/2014 08:30

The facts are that after the farm out Petroneft will own 50% of and be operator of licence 61 & 67.
Have 2P reserves of 72 million barrels.
Total potential resources of 300 million barrels
Be debt free.
Have approx $ 8 million in cash.
Be producing 1200 bopd.
OIL will be investing $ 45 million into licence 61 to develop Tungolskoye & Sibkrayevskoye after which all costs will be shared 50/50.

Now, Someone put a value on the above ?.

[rcturner2] 23/4/2014 08:03

A fair point, but this will involve spending the half which is currently cash, so it is swings and roundabouts. If they spend all the cash and get production up and the remaining barrels are valued at $2, then they will have stood still, the overall total value will be the same.

[bmw30csl] 23/4/2014 07:58

That's true RCT but it also does not credit the remaining equity for the lack of debt or the ability to invest - using the same valuation for the remainder of 61 as the backs to the wall one is overly punitive.

[rcturner2] 23/4/2014 07:01

Gavin your calculation ignores the debt.

[ravin146] 23/4/2014 06:41

Morning. Oil India, the second biggest explorer/producer in India is not that naive. They see potential for a return. Ptr is post deal debt free, resource/infrastructure rich, have fund to explore/expertise and will generate clean cash as production continues/increases. Hopefully a new chapter of a gradual rise in share price from here. It's the rise in production that will help the share price not necessarily this deal.Believe...GLA

[bmw30csl] 23/4/2014 00:33

Gavin, it is odd that they are going with a core valuation. It is out of keeping with other e+ps and the industry. Guess it gives enough upside anyway and they can nudge it up then if things like Sib or T work.

[gavinbell] 22/4/2014 22:50

hxxp://www.worldstocks.co.uk/forum/viewtopic.php?f=2&t=8388&p=81254#p81254

davy valuation is for "core" valuation (ie at the minimum), ie since we were paid worth $62.5m for 50% of licence 61, so another 50% we are still holding will also at minimum worth $62.5m

hence total value = $125m, ie £74.3m

this equates to 74.3/707.25 = about 11p per share

so, farm out has put a minimum to PTR valuation, ie PTR share price should be around 11p min (ie core valuation) now but of course, PTR itself is producing and the cash generating is much more than $1 per barrel and as such this will only add to further upsides.

Oil India will probably provides technical expertise (regardless who is the operator) which will be useful in ramping up production and mitigating any issues.

eg, OEX which hasnt yet found oil already valued at £30m market cap as they are being valued at their "potentials and upsides" and yet, PTR has nil value for its "potentials" even though we have confirmed oil?

[seangwhite] 22/4/2014 22:14

Well the news the BOD are relying on for their salvation is not going down too well.Natlata would not have to do much in the way of a business plan to encourage most holders to jump ship and vote against our BOD. Lets see how the EGM vote goes after Natlatas response.The BOD really need to address the conflict of interest in having their sole drilling contractor as a BOD member - a bit amatuerish for a UK listed entity to say the least.Lets see how DF & PD try to sell the deal in the next weeks - the share price will be the final arbiter.GLTA -see you at the EGM

[jasper2712] 22/4/2014 19:47

We all seem to forget that OIL are not just going to sit back and see their investment squandered as has happened in the past. I would not be surprised that they will bring in their own technical team and a modern approach to drilling rather than the vertical drills that have been the norm.
Natlata have put forward a lot of relevant questions that need to be answered by the board

[bmw30csl] 22/4/2014 19:31

I can understand people using the $1/bbl to value the company but I do not agree with it. For me this metric is a distressed value and does not now apply to the remaining bbls. I have patience and will use it here as I think these turnaround stories are very powerful. The key for me will be the IP rates of the new wells they drill - they need to be 200bbl wells in Arb and then the Sib well needs to show us good results. The latter is more key than the Arb wells. I wonder if they can truck oil out of Sib if it works? It looks like its a 20km pipeline so I guess $10mn spend?

[bmw30csl] 22/4/2014 18:42

I think sentiment here is still awful - a lot of people don't realise that the barrels we have 'sold' were never going to be produced by PTR without a big injection of cash. They still have a reserve life of 90 years even if production gets up to 4250 bopd. Licence 67 is very underexplored and Arawak will be keen to do something with it.

I am going to continue to hold as i think the turnaround here over the next 2 years will be quite a good story. Not many junior oilers with lots of reserves (rather than resources), reasonable production, infrastructure to monetise reserves fairly easily and Bazhenov shale potential. Yes it is in Russia but the markets are shaking this off surprisingly well and for me it is not a big risk - we cant sanction them unless we decided we like being very cold! It might even be a case of 'buy on the sound of gun fire!'

Best of luck to everyone here.

[rcturner2] 22/4/2014 18:29

Indeed Katsy, not sure if you include me in that hall of shame or not. Your comments today are certainly spot on.

I think long term value here will only come if the Ukraine situation eases off and there is success with the drill bit.

[seangwhite] 22/4/2014 17:52

RCT

Well at least you made a profit, a fair few in PTR have a long way to go for that.
I expected more today but thats life. I expect the year could be a good one for this lot but there is no such thing as a cert in this sector.

GLTA

[denis black gold] 22/4/2014 17:41

RC.... sorry to see you exit... at least you didn't make a loss on PTR...!!! Dont burn any bridges though as you might be tempted back another day..!! Must say i am HUGELY disappointed by the markets re action today, but what can one do...

[bloodinthestreet2] 22/4/2014 17:38

GOODBODYs view today in case haven't seen it either

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.

[bloodinthestreet2] 22/4/2014 17:36

DAVY view today - i case you haven't seen it

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.

[rcturner2] 22/4/2014 16:48

I have sold out today. I got close to 7p and made a profit, which didn't look possible not so long ago.

I tend to agree with Goodbody that top value is probably 9p and once you add in the risk relating to Russia (thanks Putin) I cannot see the point of holding on hoping that value gap will close.