Fresh Canvass Assuming that most of the unabashed promoters are in fact moved to the private group, perhaps a review of facts may be helpful to frame a realistic expectation of a possible bid for lfd's interest for those open-minded followers who are still on this board.
When acquired in 2009, lfd rec'd a 20% interest and had an inside arrangement to acquire an additional 20% intererst in the Chia Block. This is a very favorable block, with ease of access, flat terrain conducive to oil operations and with 9 old wells already on the land! Detailed information is sparse for these wells, but after disappointing results from the initial wells, a well in late 1930s apparently tested 5000 bopd. Saddam expressed interest in developing the field, but this was never done.
Longford embarked on a 300 km seismic program and press released that the seismic would locate drilling locations to be started in Q1 2010. Longford also released an initial assessment that the most likely fiield size was 130 million barrels (100 % number, most likley case by independent evaluatuion).
Longford subsequently announced that (1) they had indeed acquired an additional 20% interest by agreeing to pay a 40% royalty on their profit oil interest and (2) the most likely reserve size for the Chia pool was reduced to 70 million barrels (based on second independent evaluation which used the seismic to map the pool; this seismic also showed several newly recognized propsects which were assigned possible resources, but addditional seismic is required to confirm whether or not these are valid drillable prospects).
The announced drilling program has been delayed with little explanation and although the well site has been prepared, lfd apparently does not have the funds to execute the drilling program.
Longford is in default with kurds and has not paid most of the bonus payments required by the kurds. To date, the kurds seem OK with this situation; however, when the SEC reviewed a proposed financing in spring of 2010, management withdrew the announced arrangement in favour of a smaller private financing. The reasons for this were never explained, but there is a suggestion that lfd could not provide sufficient proof to the SEC that the psc was still a valid contract?
Terms of the psc require 2 wells to be drilled in the first 3 year exploration phase, which ends in a little over 5 months from to-day. Failure to complete drilling of both wells will result in forefeiture of the company's interest unless the kurds agree to renegotiate the terms.
Rumors have circulated that Genel, who currently holds a 20% interest in block and several other blocks in kurdistan is interested in lfd share and has or will make an offer. Posters have debated whether Genel or Longford have the upper hand in a potential negotiation.
Additional comments for consideration are summarized as follows (above statements are factual to my best knowledge, while the following comments are speculative).
1. Detailed info is sparse for exisiting wells. It was reported that British Burma drilled later wells and did not develop the field because reserves were too small. A 5000 bopd well should have been attractive but it is unknown if this rate was a stabilizeed flow, or if the well was also producing water? The independent evaluator recognized some uncertainty by indicating a wide range of possible reserve sizes. The most likely size of 70 million is small by mid east standards and likely near to a break-even pool size. Therefore, there is not much wiggle room if things do not go as well as expected (such as higher costs and a smaller reserve number either due to a smaller size, higher water cut or smaller recovery.
2. The additional 40% royalty is onerous and unusual by industry standards. I think this would be a significant deterrent to the larger industry companies.
3. There is no longer sufficient time to drill 2 wells, so lfd, genel or any company who wants to acquire interest will have to negotiate an extension with the kurds. Again, this is likely a major deterrent to any company new to kurdistan and makes Genel the most likely interested party. Genel is favored by the kurds, is a known operator to the kurds and knows the modus operendi to negotiate with the kurds.
Who has the upperhand? Genel risks losing their interest with lfd if the psc expires; however, Genel is in best position to negotiate an extension or a new psc. Longford has no basis to negotiate an extension of present contract as they cannot demonstrate any rationale as to how they can come up with funds if an extension is granted (afterall, lfd has had almost 1 year to execute fiasnacing and drilling program without results). On june 12th 2012, the lfd value in Chia clearly goes to zero, so clearly they are not negotiating from strength (as they could have done last summer for instance).
Based on my perspective, I see an increasingly desperate situation for lfd. This is confirmed by a stagnant share price with recent history unsupportive of the wildly optomistic numbers previously proposed by other posters. I would be appreciative of some wild bid by Genel, but am not holding my breath. If in fact Genel has bid, I am nervous why a closing is taking so long? It could be that both sides are waiting for kurd approval or that both sides are still dickering, in which case time is a big enemy for lfd (assuming that Genel has already negotiated an extension with kurds). If Genel has not already negotiated a deal with kurds, then this is already a dead deal.