Two Very Important Questions:These 2 questions are for those who knows CGX for a long time and not some trader that just jumped on board (they address two deep underlying concerns):
1. Will CGX be getting a partner to operate Eagle Shallow? If so, what's your estimate as to how much working interest they will have to give up in return for the operator technical skills? If not, do they have a technical team that's capable of such an operation on their own or will they hire a technical team and what would that cost? We know Repsol is operator for Jaguar but what about Eagle Shallow?
2. How much confidence does management really have in the upside potential of this company since they sold 20% to Pacific Rubiales for only $41 million (45% of the private placement) and this was done after the Tullow discovery. This absolutely makes no sense to me, if management really believed in the potential of the acerage they have, why would you gave away 20% of it for just $41 million to a company that doesn't have offshore operations? Did the recent Murphy two dry wells scared them and on any good news (in this case Tullow discovery) gave them an opportunity to sell portion of the company to raise cash for continued operations? Now if Inpex hits something, can we expect them to sell another 10% to 20% of the company for double the price ($40 to $80 million respectively)?
Add to that, the remaining shares from that private placement represented 25% of the current company -- again, why would you give it away at 70 cents per share if you truely believe in the upside potential? Is this another one of those stocks that is being hyped to the sky with no consideration that these types of operations are really high risk -- success rate of hitting is between 1 in 8 to 1 in 12? Just look at recent Murphy dry wells, is Murphy blocks worst than CGX's given that they are East of CGX blocks? The Eastern half of the basin to me would be more high probability than the Western half were CGX has their blocks (Just look at the map, look how far East the Zaeydus well was -- clsoer to where the two continental plates were joined)
Basically, they sold 40% of the company for $92 million after the Tullow discovery (at today's closing price, the company is already worth $340 million with no changes/update since the private placement). Anyone from the outside looking at this would surely want answers to this question especially after the big Tullow discovery. Surely they could have gotton a much better deal if they had great confidence in their acerage. How good will this acerage prove to be? It looks like management don't think it's worth too much given what they sold 40% for ($92 million) and they have technical data on the acerage to do their analysis -- maybe those Murphy dry wells give them a wake up call?