Turnaround Story of 2014 ? This is an unusual pik but one for which the reward could be very substantial.
Management have initiated a strategic review and we should know soon what they plan to do.
There is substantial value here.
1...Management are all blue chip, including executives from Nexen, Gulf, Talsiman, Vermillion etc and they have a stake in the company. Their expertise is from nearly all of the oil producing regions of the world.
2. 2P Reserves
The natural gas and natural gas liquid 2P reserves attributable to ArPetrol’s interest in the Faro Virgenes concession as prepared by Gaffney, Cline & Associates Inc. effective December 31, 2012 were 42,210 MMcf as of December 31, 2012.
. The GCA Report also presented a 28% increase to the net present value of future net revenue of proved plus probable reserves (before deducting income tax; discounted at 10%) from US$96 million as of December 31, 2011 to US$123 million as of December 31, 2012. This values the company at $0.21 per share
3.Current cash flows
RPT produces about 185 boepd generating about $2 million in annual sales.
It also owns a gas processing plant with a capacity of 85MMcfd which generates about $10 million US per year in processing fees.
Combined, annual cash flows are about $6 million US or just above $0.01 per share.
The perspective
The Faro Virgenes field has 3 redevelopment wells each capable of producing 1000 boepd.
These are deep and expensive re-drills costing about $18 million to drill and produce.
RPT drilled its first FV well in 2012.The drill string stuck near TD and despite rerpeated attempts to remove it, the well was temporarily plugged. Total costs balloned to about $25 million and depleted RPTs working capital to a negative position.
It will need about $10 million to recomplete and tie in this well......money that it does not have.
Hence, the strategic review and the current deprerssed share price.
RPT has no LT debt and a WC deficit of $4.9 million which was recently reduced by a shareholder loan ( which is a very positive sign.
A 50 to 1 share consolidation has been approved which should benefit the share price considerably.
Options
1. Sell the entire company
2.Sell the FV field and concentrate on its rapidly growing gas processing business.
3.Raise capital using post consolidated shares and re-develop the FV initial well which will double annual sales to about $25 million. Develop 2 more wells and annual ssles would be over $45 million.
I have no idea what option they will choose but in each one the intrinaic value could be above 5 cents per preconsolidated share.
So, thats it.