RE: Following solo's lead As a Stockhouse initiate myself, let me echo the welcome that JYD extended to you. And, let me also add that I found your first post very interesting reading. I'm glad to read the perspectives of someone who seems to have considerable knowledge of developing hydrocarbon systems...something I am relatively ignorant of. My knowledge tends more toward the insider dealings / financial architecture of companies (i.e. who is involved and what they are doing to enrich themselves). It was the possibility of such an exchange of perspectives that attracted me to become a Stockhouse member recently.
If I may, please allow me to comment on, and question-for-clarity, the points you touched on.
1. Check.
2. Check again...and one of the attractions of TAO to me. I have in the past invested in companies exploring for and/or trying to develop oil + gas assets in various parts of the world. No matter the potential of the targets, many of these other areas have considerable risks or headwinds compared to TAO in New Zealand (In western Canada, there is the bottleneck constraint of pipeline delivery of the product to market, a current glut of natural gas that diminishes its value to companies and a market price that when combined with costs results in much lower netbacks than TAO enjoys; in regions where deep sea drilling is required, there are huge costs to drill, often pressures encountered that test equipment tolerances and, at least initially, low success rates [see the experiences of OYL off the coast of Guyana for recent examples of this]; in Europe, FO had the prospect of huge Basin Centred Gas Accumulations in the Mako Trough deep underground in Hungary, traded at prices up to $7.00 in 2006 on the potential of developing this target...but now trades at $0.20 as it seeks to explore prospects in South Africa; in Kurdistan, the latest hot area to drill for 'elephant fields' there are a host of risks...deep wells that are expensive to drill, the fingers of the KRG forever in your pie, having to share the production costs and income with partners you do not necessarily have any say in the choice of, having poor infrastructure in place to deliver the oil to market or to deal with gas encountered during drilling [resulting in any oil sold realizing only 'local' market prices...which are not nearly North American WTI, or Brent, pricing]...and, oh yeah, the geopolitical risks of operating in an area of Iraq that seeks autonomy from the central government in Baghdad (to better understand the situation in Kurdistan, check out SNM and/or WZR). I like the risk profile of TAO's situation much better than any of the previous situations mentioned.
3. TAO has been very good about managing its finances, ensuring that it has enough money to carry out its plans without diluting its shareholders (again, referring back to some of the companies mentioned in the previous point, here are the current number of shares outstanding...TAO has ~60m, FO had 259m in 2006 and now has 696m, OYL has 411m, WZR has 412m, and SNM has 810m). The opt-out option after Phase 1 of the Apache jv on the East Coast would be a pretty standard clause of a jv so, while the jv does not necessarily result in a $100m spend, that's not a concern for me. What I don't understand is why TAO took one of the recent PEPs awarded 100% for itself, but felt the need to jv the other three PEPs with East West Petroleum (who!?!)...can anyone on the board shed any light on this? As Danka mentioned, that's a very rare occurence in these bids.
4. Check again...the East Coast basin jv with Apache allows TAO to participate in what could be an enormous asset without having to expend anymore money until Apache has earned in by spending its $100m. Danka, glad to hear that your Apache contact says Apache is excited about the prospects for this jv. The East Coast assets were originally held by TransOrient Petroleum (TOZ/TOPLF), and TAOs takeover of TOZ is what has brought me back into TAO ownership after dumping my initial position back in 2006...they are, imho, the 'game-changer'. The time and infrastructure issues in developing the East Coast assets may result in TAO allowing itself to be bought out once the viability of developing those asets has been proven...or so I'm hoping!
5. Danka...what do you think then that TAOs valuation should be come March 31st, 2013 assuming completion of their infrastructure upgrades and all behind-pipe boe's flowing?
6. The potential to hit larger structures in Taranaki is another potential 'game-changer'...albeit one that I'm not banking on right now. It would be sweet icing on the cake, though!
On the other side:
1. The Sidewinder economics may not be that interesting at $4 but as a throw-in to the main catalysts, it may yet have some value...or, it may get spun-out...say, to CRD?
2. I too think that TAO management have been very transparent about the oil-gas mix. I agree that the overall netback from Tapis pricing is very forgiving to the oil-gas mix ratio. I'd also point out that I don't think the appointment of Ken Vidalin, founder of Methanex (apparently "with major infrastructure in New Zealand and the country's largest commercial user of natural gas" as per Vidalin's bio on TAO's website) is a meaningless coincidence in this regard.
3. The shallow Taranaki formations...small but easy to drill and profitable...may not inspire takeover interest...but they may allow TAO to build its operations to the point that this division of TAO becomes the New Zealand equivalent of Canada's CPG...i.e. a dividend paying entity of interst to yield-seeking investors.
4. Once infrastructure buildout is complete, TAO will have 'stem-to-stern' control of its production, which will be intrinsically more profitable, as well as opening up the possibility of servicing the needs of other local producers. I agree that TAO management seems to be learning their lessons well as they continue to amass drilling experience and data...that is one reason I have stuck with TAO rather than switch any of my investment over to NZ which is also operating in similar areas but earlier-stage.
I think that we are basically on the same page, having arrived there via different routes, and with perhaps different paragraphs on that page highlighted according to our individual investing parameters and goals.
Once again, welcome aboard...I look forward to reading your perspective views on TAO as we go forward from here.