Feedback on PFC's Presentation in VancouverHere's the results of the PFC Investor Presentation I attended in Vancouver on Monday. I don't know how much I can post at a time so you might have to read thru several posts. I'll give a summary of it and then go over the questions I and others managed to get answers for. Earl Scott , new pres and CEO, gave the PowerPoint Presentation for about 20 mins and then took questions. Afterwards there was a meet the directors session in which I had two conversations: one with Earl Scott and the other with Paul Bennett, who though retired, is retained as a consultant. Presentation was lackluster (don't let an engineer do a sell, but then their last one was their financial officer, so I guess it is an improvement), and the slide package had six slides added to it after the back cover and the same error was in the projector software file. PFC always does this: it doesn't seem to know how to promote its stock and it often doesn't take care of the details that would give investors the idea that the company is on the ball.
The presentation was called "Opportunity on the horizon." Scott showed a slide of all the majors who are in Oz (9). Then a slide of all the LNG plants proposed along the north coast (12). Next went over their total Georgina acreage. Next was well stratiography and the oil window in Owen 3 (25 meters of hydrocarbon saturation.) In the lithology slides, Scott compared Lower Arthur Creek/Thorntonia (LAC) to Eagle Ford, Montney (Alberta) and Horn River. Bakken was absent, though it had been in earlier company presentations. In the table, LAC had similar numbers to the three in organic carbon, porosity, permeability, and thickness (an old slide). Next was the massive extent of the LAC, greater than 40 meters of source rocks, higher max thickness than Bakken shales, and the usual Ryder Scott est. of 26.4 BBl of recoverable oil. Then went over their business strategy: were an early entry, raised $58m capital, shot 928km of seismic + drilled 3 horiz. wells, and attracted a major operator. Next the plan for 2014 and beyond in which Scott mentioned that he would be going to Oz in two weeks to work out a work/drill plan and budget with Statoil (SO) for up to 6 wells, mentioning that the work/drill team from Texas was already there. He also said that SO is "focused on the oil window and is very excited about the results"; also wants to focus on oil rather than gas; what excited them were the logs (high porosities) and sweet spots from the three wells, especially Owen; so SO is concentrating on Thortonia (ozboil's question). Slide to follow was about SO as a world class partner and showed all their US farm-ins and current operations in the States. Last was a slide on the investment case: share is attractively valued (currently at $0.17 yet the farmin with SO implies a share price of $0.67; big resource numbers and exploration upside (Ryder Scott numbers, agreement with SO valuing the land at $19.49 an acre, and PFC with 20% of "massive tracts of under explored permits"; and last PFC's focus on enhancing shareholder value (reduced cash burn, healthy bank account = staying power, 3-year carried interest, no CAPEX, and "currently evaluating domestic and international opportunities.") Concluding, Scot said they had learned a lot and were heading in the right direction technically; also that there's going to be a lot of activity next year cos SO has to complete by year's end.
Questions: I asked Scott about the three wells already drilled (several posters had this question): Baldwin will prob. be abandoned cos of cost of repairing the casing ("If this was Calgary we could repair it in no time.") MacIntyre, he does not know what SO will do with it, though probably they will leave that, too. Owen is still undecided, but PFC and SO think the water was from a fault that the horiz leg cut into so there's not much they can do with that. However, in choosing the locations for the 4-6 wells in 2014, they will not drill near any fault lines.
An investor asked what PFC is planning to do next (several of you had concerns here). Scott (and later Bennett in conversation with me) was very cagey about this. He said that they are considering "something very attractive, maybe a take out or a merger or something." Later I asked Bennett for info on this and he said that they have an additional $5m on top of the $9m and that it seems reasonable that if there's a company in production but short on cash and PFC has the cash but wants production then a merger would be a solution. No more details, but in response to a question on what is there to catalyze the share price, Scott said that what they are working on might well do that.
Question about was the oil heavy or light in the shows; Scott said it was not heavy, but need bigger samples to determine its quality. In response to a question as to what is SO's short term goal he said that it was to get samples to the surface and analyze their chemistry.
I'm not very oil industry savvy so I asked Scott whether the vertical wells would be fracked. He said that the big problem with last year's three was the large diameter of the drill hole. So PFC spent $17k designing a smaller drill that SO paid them for and then SO modified it even more. So the drill hole will be narrower which means the casing won't be as prone to breaking and the hole will be fracked along the vertical shaft (no plans for horiz drilling). Because of the narrow hole the fracking will be proportionately shorter so they will get less oil out than from a horiz leg (3 -20 bbl as opposed to 100+) but they will be better able to estimate the resource. As I understand it, the fracking will go out from the vertical well bore so that the area around the bore is fracked. They will get less oil out, but it will be easier and a lot cheaper. It will still be about $6m a well. He added that SO is planning to drill on most or all (can't remember exactly) of the 6 PFC permits next year.
I asked about the rig scarcity and Scott said that SO has their rig already. I also asked Bennett if he expected production next year, and he said that the SO's goal is to prove the resource. So probably we'll see holes drilled, estimated and capped so that SO can see the extent of the recoverable resource.
Last question was about press releases since SO is probably not likely to release info on the progress of the drill plan. Both Scott and Bennett said that they have in the farmin agreement that PFC can issue releases/updates without SO. Major events, though, will be shared releases. So it looks like PFC will be keeping us informed.
Summary comment: if I was a new investor, I'd be pretty cautious after the presentation. They didn't really say what the hydrocarbon shows would mean as far as getting at the oil. Even with the old favorite, Ryder Scott report, Scott said "it probably needs to be updated" since it's 2010, but he never gave his audience a sense of whether an update would be for higher or lower estimates. They need someone who is a trained marketer/promoter. I'm not talking exaggerations, but you can sell potential. Anyway folks I hope you found some useful info here. As some of us often say, hang in there!