FEB-27-2013: RUNNING NUMBERS Broke this post into two parts - from a 'QUANTITATIVE' and 'QUALITATIVE' perspective.
QUANTITATIVE:
Overview of 3 scenarios:
1) No Dillution and No JVs: unreaslitic scenario, though interesting to review.
- Eagle Deep: 2.5B Barrels of Oil * 100% interest * $6.2/boe = $15.5B or $33.70 per CGX share
- Jaguar: 1.5B Barrels of OIl * 25% interest * $6.2/boe = $2.3B or $5.05 per CGX share
- Corentyne Carbonate Prospects: 300M Barrels of Oil * 100% * $6.2/boe = $613M or $1.33 per CGX share
- Total from 3 prospects mentioned above: $40 per CGX share
Assumptions: 460M shares/out
2) CGX Proceeds with JV of Assets: farms-out 2/3 of assets for a 1/3 carry (probably 1 well carry).
- Eagle Deep: 2.5B Barrels of Oil * 33% interest * $6.2/boe = $5.115B or $11.12 per CGX share
- Jaguar: 1.5B Barrels of OIl * 10% interest * $6.2/boe = $930M or $2.02 per CGX share
- Corentyne Carbonate Prospects: 300M Barrels of Oil * 100% * $6.2/boe = $613M or $1.33 per CGX share
- Total from 3 prospects mentioned above: $14 per CGX share
Assumptions: 460M shares/out
3) CGX & Recent PRE Deal: dilluted to 835M shares/out (which includes warrants)
- Eagle Deep: 2.5B Barrels of Oil * 100% interest * $6.2/boe = $15.5B or $18.56 per CGX share
- Jaguar: 1.5B Barrels of OIl * 25% interest * $6.2/boe = $2.3B or $2.78 per CGX share
- Corentyne Carbonate Prospects: 300M Barrels of Oil * 100% * $6.2/boe = $613M or $2.23 per CGX share
- Total from 3 prospects mentioned above: $24 per CGX share
Assumptions: 835M shares/out. Would imagine that Tullow leaving Georgetown Block would possibly leave CGX with a higher working interest in that block (not included in above calculations). Note, this would be under the assumption that once PRE gains control of CGX (70% if warrants are exercised) - PRE would loan CGX capital needed to pursue a 3 well program as to keep their current interest in the blocks.
CONCLUSIONS: Based on the above calculations it would seem the recent deal with PRE would lend to a possible higher CGX share price than compared to a JV. Again, note, this would be under the assumption that once PRE gains control of CGX (70% if warrants are exercised) - PRE would loan CGX capital to pursue a 3 well program as to keep their current interest in the blocks.
QUANTITATIVE:
- I am glad to see PRE is now in complete control.
- I am glad to see the current CGX management team moving towards the exit. There is no point in having a redudant management team when PRE is on board.
- Make no mistake - we are all in the same boat with PRE. The only way PRE will be able to get a return on their investment is through increasing CGX's share price.
- In my opinion, this deal replaces the need for PRE to JV with CGX – as they own the majority of the CGX, there is no need to do so;
- CGX will not need to JV / farm down their interest in the near future – timing is up to PRE;
- Now that PRE owns 60%-70%)of CGX - would imagine PRE feels more comfortable loaning money to CGX. PRE would have complete say in how funds are allocated, priorities, etc;
- Local Guyanese wanted the opportunity to invest in a pure Guyana oil company – hence, the reason CGX was not bought out all together;
- PRE is very slick when it comes to business arrangements and they will not be giving these assets up for free.
- Would imagine that PRE made a long term committment to Guyana to get the license re-issued for 4-10 years. Further, would imagine PRE has an extensive seismic and drilling campaigned line up that will see numerous well drilled offshore Guyana.