how bad is PFC´s financial situation? I agree with the posters here (and those who posted in the Baraka´s board in Hotcopper) that this is just the first well fracked in the basin, that there are still a lot of acreage to be tested (with diverse thermal maturities), and the entire play shouldn’t be written off due to the bad results of just one well.
I´m more worried about the financial situation of Petrofrontier, the stated need to get new financing, and the chance of management being obligated to sell the whole company because of the lack of funding to continue exploring the play.
According to Q3 MD&A report, we had a working capital of US$ 16 millons at the end of Q3.
“The Phase 1 (2012 & 2013) joint exploration program consists of US$50 million (each of Statoil and the Corporation contributing $25 million). Exploration and evaluation asset expenditures for 2012 are projected to be approximately US$35 million with the balance of the Phase 1 commitment of approximately US$15 million being expended in 2013.”
Suppose that we spend US$ 2-3 millons (net to Petrofrontier) since the end of Q3 fracking the Owen well.
That leaves us with a working capital of around US$ 13-14 millons. That should be enough to afford our 50% share of the US$ 15 millons to be spent by the joint venture in 2013, and our corporate overhead (general and administrative expenses of aprox US$ 5 millons per year).
So, in summary, we have:
Owen fracking costs (PFC´s 50% share): US$ 2,5 millons (estimated)
G&A expenses from Oct 1, 2012 until Dec 31, 2013: US$ 6 millons
2013 exploration spending (PFC´s 50% share): US% 7,5 millons
Total funding requirements until the end of 2013: US$ 16 millons (equivalent to the amount of working capital at the end of Q3 2012)
I understand that there will be additional costs due to the re-treatment of the H2S issue at MacIntyre-2H and repairing the casing failure for Baldwin-2Hst1. Is there any reasonable estimate in relation to the cost of these 2 additional items?
At the end of 2013, if Statoil want to proceed to phase 2, they will have to reimburse us US$ 25 millons, so there won´t be any funding requirements for us from that point in time.
It´s difficult for me understand why management said that we are in such a difficult financial situation that we are required to initiate an strategic review process, including the chance of selling the whole corporation.
Am I missing something?
Comments are welcomed
Fernando.